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Rating Action:

Moody's Assigns First Time Ba3 CFR to Darling International; Outlook Stable

17 Nov 2010

New York, November 17, 2010 -- Moody's Investors Service assigned Ba3 corporate family and probability of default ratings to Darling International, Inc. ("Darling"), a Ba2 rating to the $625 million of senior secured credit facilities, and a (P)B2 rating to the $250 million of senior unsecured notes. At the same time, Moody's issued a speculative grade liquidity rating of SGL-2. Proceeds from the debt, including $175 million drawn under the revolving credit facility, the $300 million term loan, and the $250 million of notes alongside $100 million in equity and $60 million in cash, will be used to finance the acquisition of Griffin Industries for a total purchase price of approximately $840 million or about 6.5 times EBITDA. The rating outlook is stable. This is the first time Moody's has rated the debt obligations of Darling.

The (P)B2 rating on the senior unsecured notes is subject to review of final documentation.

The following ratings were assigned:

Darling International, Inc.:

Corporate Family Rating at Ba3;

Probability of Default Rating at Ba3;

$325 million revolving credit facility due 2015 at Ba2 (LGD3, 33%);

$300 million senior secured term loan B due 2016 at Ba2 (LGD3, 33%);

$250 million senior unsecured notes due 2018 at (P)B2 (LGD5, 86%);

Speculative Grade Liquidity Rating at SGL-2;

The outlook is stable.

RATINGS RATIONALE

The Ba3 corporate family rating reflects Darling's attractive profitability and cash flow operating performance despite volatility from commodity prices and fluctuations in raw material, significant scale in rendering and recycling for the food industry, and its critical role in the waste handling process. End products are in mostly mature markets (pet food, animal feed, and fertilizer) and modest growth is expected. Opportunities for growth will be greater in bio-fuels, a small portion of Darling's revenues today. The acquisition of Griffin Industries about doubles Darling's revenues and EBITDA and improves the company's scale and raw material diversification. Synergies are likely to include better route efficiency and some higher margin products. Despite revenue declines at both companies in fiscal 2009, flexible pricing schemes balanced the extraordinary volatility in related commodities. Importantly, Moody's anticipates a conservative financial policy from the company and near term debt repayment albeit as the company positions itself for future acquisition opportunities.

Notwithstanding these strengths, Griffin is the largest acquisition Darling has made to date and will be financed mostly with debt. The acquisition, while a strong positive for the company, carries integration risk. Both companies will remain vulnerable to volatility resulting from changes in raw material volumes as well as the price of finished products. In addition, Darling's business can be adversely impacted by several factors outside its control including, animal disease, weather, regulation and trade disputes.

Positive rating pressure would develop should debt repayment or operating margin expansion lead to CFO to net debt sustained above 20% and debt-to-EBITDA well below 3 times.

The ratings could face a negative outlook or ratings downgrade should operating performance deteriorate such that leverage approached 4 times, or if integration challenges in the Griffin acquisition differ materially from management's expectation.

The principal methodologies used in this rating were Global Food - Protein and Agriculture Industry published in September 2009, and Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009.

Darling International, Inc., founded in 1882, is a leading provider of rendering, recycling and recovery solutions to the US food industry. Finished products, sold to producers of livestock, feed, oleo-chemicals, bio-fuels, soaps and pet foods, include meat and bone meal ("MBM"), bleachable fancy tallow ("BFT"), cookie meal, and yellow grease ("YG"). Pro forma revenues for the combined company for the twelve months ended December 31, 2009 were $1.1 billion. The company is listed on the NYSE, symbol DAR.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's Investors Service considers the quality of information available on the issuer or obligation satisfactory for the purposes of assigning a credit rating.

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Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

The date on which some Credit Ratings were first released goes back to a time before Moody's Investors Service's Credit Ratings were fully digitized and accurate data may not be available. Consequently, Moody's Investors Service provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

Please see the Credit Policy page on Moodys.com for the methodologies used in determining ratings, further information on the meaning of each rating category and the definition of default and recovery.

New York
Christina Padgett
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
John Diaz
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's Investors Service
250 Greenwich Street
New York, NY 10007
U.S.A.

Moody's Assigns First Time Ba3 CFR to Darling International; Outlook Stable
No Related Data.
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