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Rating Action:

Moody's assigns Baa2 to approximately $5 billion of Campbell Soup acquisition bonds

12 Mar 2018

New York, March 12, 2018 -- Moody's Investors Service ("Moody's") assigned Baa2 ratings to approximately $5 billion of new senior unsecured notes being offered today by Campbell Soup Company ("Campbell") in seven floating and fixed rate tranches. Net proceeds from the offering will be used to partially fund the company's $6.1 billion acquisition of snacks company Snyder's-Lance Inc., ("Snyder's") that the company expects to close the acquisition around the end of March 2018. The rating outlook is stable.

The proposed approximately $5 billion of senior unsecured notes are being offered in 2- and 3-year floating rate tranches and 3-, 5-, 7-, 10- and 30-year fixed rate tranches. The final amounts and pricing of the securities will be finalized later today.

RATINGS RATIONALE

Campbell's credit profile is supported by its strong brand equities, leading market share in the declining, but highly profitable, US soup category, and stable market share in the snacks category led by the Pepperidge Farm brand. The acquisition of Snyder's-Lance will nearly double Campbell's size in snacks from $2.5 billion to $4.7 billion in sales. It also will provide sales diversity within snacks by adding leading brands in categories that are new to Campbell, including pretzels, sandwich crackers, kettle chips and deli snacks.

Campbell has stated its commitment to maintain an investment grade profile. This commitment includes prioritizing debt reduction over shareholder distributions following leveraging acquisitions until credit metrics are restored. This is a key credit consideration.

Ratings assigned:

Campbell Soup Company:

Senior unsecured floating rate notes at Baa2;

Senior unsecured fixed rate notes at Baa2;

On Monday, December 18th Campbell announced that it had agreed to acquire Snyder's-Lance Inc. for $6.1 billion in cash, including $1.1 billion of existing Snyder's-Lance debt. Because of the significant increase in financial leverage that will result from the acquisition, Moody's downgraded Campbell's senior unsecured debt rating to Baa2 from A3 with a stable outlook on March 9th. Moody's also affirmed the company's Prime-2 short-term rating .

Upon closing, Moody's estimates that adjusted debt/EBITDA will rise to about 5.0x before synergies, up from 2.2x as of 30 October 2017. The transaction also will be initially dilutive to profit margins. But financial metrics and should improve over time through steady debt reduction and realization of up to $295 million of planned transaction related cost savings.

Campbell's ratings could be downgraded if core operating performance deteriorates further, the company encounters significant setbacks in the integration of Snyder's Lance, or if the company shifts to a more aggressive financial policy prior to restoring credit metrics. Quantitatively, if debt/EBITDA is not likely to decline below 4.0x by fiscal 2020 or retained cash flow/net debt remains below 13%, the ratings could be downgraded.

Conversely, if Campbell improves its operating performance, successfully integrates Snyder's-Lance as planned, and strengthens its credit metrics, an upgrade is possible. Quantitatively, retained cash flow to net debt sustained above 16% could support an upgrade.

The principal methodology used in these ratings was Global Packaged Goods published in January 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Campbell Soup Company, headquartered in Camden, New Jersey, is the world's leading producer of retail soups, and a global producer and marketer of a portfolio of simple meals, baked snacks and healthy beverages. The company's brands include Campbell's, Swanson, Prego, V8, Pepperidge Farm, Goldfish, Arnott's, Bolthouse Farms, Garden Fresh, and Plum. Snyder's-Lance, Inc., headquartered in Charlotte, NC, manufactures and markets snack foods primarily throughout the United States and internationally. Snyder's-Lance's products include pretzels, sandwich crackers, potato chips, popcorn, nuts and other snacks. Key brands include Snyder's of Hanover, Lance, KETTLE, Cape Cod, Pop Secret and Emerald. The company's annual sales are approximately $2.2 billion. Pro forma sales for the combined company exceed $10 billion.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt 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.

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

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

Peter H. Abdill, CFA
MD - Corporate Finance
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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