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Global Credit Research - 08 Dec 2010
Approximately $250 million of senior unsecured debt affected
New York, December 08, 2010 -- Moody's Investors Service today assigned a Baa3 rating to Church &
Dwight Company, Inc.'s (CHD) proposed $250 million,
five-year senior unsecured senior note offering and its shelf registration
for senior unsecured debt at P(Baa3). Moody's also affirmed the
company's existing ratings including its Baa3 rating on its recently issued
$500 million senior unsecured revolving credit facility.
Proceeds of the senior notes offering will be used to finance the redemption
of its existing Ba1-rated, $250 million senior subordinated
notes on December 30, 2010. Ratings of the senior subordinated
notes will be withdrawn upon completion of the transaction. The
rating outlook is stable.
Ratings of Church and Dwight assigned include the following:
- $250 million senior notes December 2015 at Baa3;
- Senior unsecured shelf registration at P(Baa3).
Ratings of Church and Dwight affirmed include the following:
- $500 million senior unsecured revolving credit facility
at Baa3 due November 2015
CHD's Baa3 senior unsecured rated reflects its stable operating
performance supported by good organic growth from its diversified portfolio
of leading premium and value brands and conservative financial policy,
which has resulted in strong credit metrics and a reduction in financial
leverage over the past five years. It also incorporates Moody's
expectation that despite intensifying competition in its consumer segments,
cash flow should remain strong over the next two years, further
supporting its credit profile.
"CHD's focus on value-oriented products and continuous investment
in its portfolio of premium brands provides resiliency against a prolonged
weak economy and stiff competition in its primary U.S. market
while continuing to support its ability to generate consistent organic
growth," commented Janice Hofferber, Moody's Vice President
and Senior Credit Officer.
Nevertheless, the risk for modest gross margin pressure in the near-term
is heightened given the recent aggressive promotional activity among large
consumer product competitors and higher input inflation. As a result,
pricing flexibility may be more limited as it will likely be more difficult
to pass on higher raw material costs given this intensified competitive
environment combined with the still highly price-sensitive consumer.
In addition, Moody's expects CHD to continue to supplement its organic
growth with strategic acquisitions in its core personal care and household
products categories given its ability to build high cash balances through
operations, low leverage and limited opportunities for strong organic
growth within the recession-affected U.S. consumer
products category. However, CHD's strong credit metrics and
significant cash-building ability have given the company adequate
cushion to pursue modest acquisitions while maintaining its investment
grade rating. As of October 1, 2010, CHD maintained
strong credit metrics including Debt to EBITDA and Interest Coverage ratios
of approximately 1.5 times and 12 times, respectively.
"Although CHD is likely to continue to pursue strategic acquisitions,
we expect the company to maintain conservative financial policies with
regard to share repurchases and dividends as well as maintain a disciplined
approach to acquisitions including a commitment to restoring investment
grade credit metrics quickly following a leveraged acquisition,"
added Ms. Hofferber.
Given the recent transition to investment grade, a near term improvement
to the rating is not anticipated. Improved scale and diversification
combined with sustained profitability and credit metrics and a commitment
to an investment grade credit profile would likely lead to positive ratings
The rating and/or outlook could be negatively impacted if the company's
financial performance deteriorates materially such that leverage was above
3.0 times for a prolonged period or if management significantly
deviated from its current disciplined financial policies regarding acquisitions,
share repurchases and dividends.
Moody's last rating action was on November 9, 2010, when a
Baa3 rating was assigned to the company's new senior unsecured revolving
For additional information, please refer to Moody's Credit Opinion
on CHD available on www.moodys.com.
The principal methodology used in this rating was Global Packaged Goods
Industry published in July 2009.
Church & Dwight Company, Inc. based in Princeton,
New Jersey is a leading marketer and manufacturer of a broad portfolio
of household and personal care consumer products under the Arm and Hammer
brand name. The company is also the world's leading sodium bicarbonate
producer. CHD's other brands include OxiClean, Orajel,
Arrid, Trojan, Nair, Simply Saline, First Response,
Close-Up, Mentadent, Aim, SpinBrush and Xtra.
Total revenues for the last twelve months ended October 1, 2010
were approximately $2.6 billion.
Information sources used to prepare the credit rating are the following:
parties 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.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
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.
Janice Hofferber, CFA
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's Investors Service
Moody's rates Church and Dwight's senior notes Baa3
250 Greenwich Street
New York, NY 10007
No Related Data.
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