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Rating Action:

Moody's assigns A3 to Mondelez subsidiary MIHN's €1.25 billion notes

16 Sep 2020

New York, September 16, 2020 -- Moody's Investors Service, ("Moody's") today assigned A3 ratings to €1.25 billion of senior unsecured Rule 144A notes being offered in two tranches by Mondelez International Holdings Netherlands BV ("MIHN"), an intermediate holding company wholly owned by Mondelez International, Inc. ("Mondelez", Baa1 stable). The new MIHN notes will be guaranteed by Mondelez. Ratings of Mondelez, including its Baa1 senior unsecured and Prime-2 commercial paper ratings are unaffected. The outlook is stable.

The proposed transactions are credit positive because they will extend maturities and reduce short-term debt without materially affecting cash interest costs.

The proposed €1.25 billion unsecured notes are being offering in two tranches consisting of €500 million 0% notes due 2026 and €750 million 0.375% note due 2029. Net proceeds from the new Euro notes will be used primarily to repay debt outstanding at MIHN and parent Mondelez, including MIHN's USD $750 million term loan due October 28, 2021 and Mondelez commercial paper. Mondelez had $2.7 billion of commercial paper outstanding as of June 30, 2020.

The following ratings/assessments are affected by today's action:

New Assignments:

..Issuer: Mondelez International Hldgs Netherlands BV

....Senior Unsecured Notes, Assigned A3

RATINGS RATIONALE

Mondelez's Baa1/Prime-2 credit profile is supported by its large scale and leading global market position in the attractive global snacks category, which will continue to grow faster than the broader packaged food industry. The credit profile also is supported by the company's good earnings growth potential, driven by cost efficiency programs and further expansion opportunities in developing markets. These credit positives are balanced against corporate governance risks related to aggressive financial policy, including a history of using free cash flow to repurchase shares.

The ratings on the MIHN senior unsecured debt instruments are one notch higher than the Mondelez senior unsecured debt ratings based on their relative structural advantages. MIHN is an intermediate holding company that is structurally closer to Mondelez's international operating subsidiaries that generate approximately 73% of total sales and a majority of the operating income. This is in comparison to the 25% proportion of consolidated debt held at MIHN, including $1.75 billion of unsecured term loans that we do not rate. In addition, these debt instruments benefit from downstream guarantees from Mondelez that in effect provide additional support from the 27% of total company sales generated outside of MIHN. MIHN does not provide any upstream guarantees of Mondelez's debt instruments. Barring incremental debt issuance at MIHN, these relative advantages will increase over time as the aggregate amount of MIHN debt securities amortize through debt maturities in October 2021 ($2.25 billion), September 2022 ($500 million), October 2022 ($500 million), September 2024 ($500 million), October 2024 ($500 million) and October 2031 (€500 million).

Packaged food companies such as Mondelez are moderately exposed to social risks related to responsible production, health and safety standards and evolving consumer lifestyle changes. The sector is moderately exposed to environmental risks such as soil/water and land use, and energy & emissions impacts, among others. These factors will continue to play an important role in evaluating the overall creditworthiness of food processors, like Mondelez, particularly as the industry continues to evolve globally.

While Moody's anticipates that acquisitions will continue to play an important role in the company's growth strategy, based on Mondelez's large scale, acquisitions are unlikely to be transformational. Rather, Moody's expects that the company will pursue small (<$1 billion), branded snacks acquisitions globally, mostly in emerging markets. Mondelez's governance is characterized by a somewhat aggressive financial strategy as evidenced by its high level of share repurchases and leverage that is high for its rating.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

The stable outlook reflects Mondelez's strong business profile and Moody's expectation that financial leverage will moderate gradually through earnings growth or possible divestitures.

A rating downgrade is possible if the company expands its portfolio into less attractive categories, adopts a more aggressive financial policy, sustains debt/EBITDA materially above 3.5x, or sustains retained cash flow / net debt below 14%. Mondelez's ratings could be upgraded if the company maintains leading market shares in global snacks, and improves operating performance such that retained cash flow / net debt is sustained above 18% and operating profit margin is sustained above 14%.

The principal methodology used in these ratings was Consumer Packaged Goods Methodology published in February 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1202237. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Headquartered in Chicago, Illinois, Mondelez is the fifth-largest food company in the world (behind Nestlé, PepsiCo, Mars and Danone) with approximately $26 billion in annual sales. Its brand portfolio includes snack brands (Oreo and LU biscuits, Cadbury and Milka chocolates, and Trident gum) and non-snack brands (Tang powdered beverages and Philadelphia cheese). In fiscal 2019, approximately 89% of revenues were derived from snack products and 37% of revenues come from emerging markets. Mondelez is publicly traded on the NASDAQ under the ticker "MDLZ"

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Brian Weddington, CFA
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

John E. Puchalla, CFA
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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