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Rating Action:

Moody's upgrades Pinnacle Foods to B2; rates new debt

10 Aug 2010

Approximately $2.9 billion of debt instruments affected

New York, August 10, 2010 -- Moody's Investors Service ("Moody's") upgraded the Corporate Family and Probability of Default Ratings of Pinnacle Foods Finance, LLC ("Pinnacle") to B2 from B3 and assigned a rating of B3 to $400 million of senior unsecured notes and a rating of Ba3 to approximately $442 million of senior secured bank debt, both being offered today. The rating outlook is stable.

The new $400 million unsecured notes are being offered in a private placement under Rule 144A of the Securities Act of 1933. Concurrent with the notes offering, Pinnacle plans to enter into a new senior secured bank term loan D, under its current bank credit agreement. The proceeds from both debt instruments will be used to retire its existing $842 million Term Loan C in its entirety, after which Moody's will withdraw the rating on this debt tranche.

The upgrade of the Corporate Family Rating to B2, reflects Moody's belief that Pinnacle's execution of the Birds Eye integration will remain reasonably close to plan, and that in spite of intensifying promotional pricing pressures in some key product segments, including frozen vegetables and baking mixes, Pinnacle will be able to partially offset gross margin pressure with ongoing cost reductions and by exiting lower-margin businesses. As a result, we expect that Pinnacle should be able to generate stable earnings generation and free cash flow that will sustain Debt/EBITDA below 6.5 times within six to twelve months.

"Price competition clearly has slowed the momentum we saw earlier in the year, but we believe that there are enough achievable cost savings remaining in the Birds Eye integration to support relatively stable earnings growth and modest debt reduction," said Brian Weddington, Moody's senior credit officer.

RATINGS REVISED:

Pinnacle Foods Finance LLC:

Corporate Family Rating to B2 from B3;

Probability of Default Rating to B2 from B3;

$150 million Senior Secured Bank Revolving Credit Facility due April 2013 to Ba3 from B2;

$1,199 million Senior Secured Bank Term Loan B Credit Facility due April 2014 to Ba3 from B2;

$842 million Senior Secured Bank Term Loan C Credit Facility due April 2014 to Ba3 from B2 (to be withdrawn);

$625 million of 9.25% Senior Unsecured Notes due April 2015 to B3 from Caa2.

$199 million of 10.625% Senior Subordinated Notes due April 2017 to Caa1 from Caa2;

RATINGS ASSIGNED:

$442 million of Term Loan D, due April 2014 at Ba3;

$400 million of new senior unsecured notes due 2017 at B3.

SGL RATING AFFIRMED:

Speculative Grade Liquidity Rating at SGL-2.

LGD RATES REVISED:

LGD Senior Secured Bank Credit Facilities (Domestic) to LGD2- 28% from LGD3 - 35%;

LGD Senior Unsecured Debt (Domestic) to LGD5 - 77% from LGD5 - 85%;

LGD Senior Subordinated Debt (Domestic) to LGD6 - 95% from LGD6 - 96%.

Pinnacle's B2 rating reflects primarily the high leverage that resulted from the leveraged acquisition of Birds Eye Foods in 2009. The rating also reflects the strong brand equity of Bird's Eye that contributed stronger profit margins and greater scale efficiencies in frozen foods. We estimate that the Birds Eye frozen foods portfolio lends itself to a relatively straightforward integration process that should generate material cost savings from its combination with Pinnacle's frozen operations, and the planned elimination of unprofitable product lines. The rating also reflects the high concentration in the highly competitive frozen foods business.

The last rating action was on December 04, 2009 when Moody's confirmed the B3 Corporate Family Rating, the debt instrument ratings, and Speculative Grade Liquidity assessments of Pinnacle Foods Finance, LLC ("Pinnacle") and assigned (P)B2 to its proposed senior secured bank facilities and (P)Caa2 to its proposed senior unsecured debt. This rating action concluded the review for possible downgrade that began on November 19, 2009 following Pinnacle's announcement that its wholly-owned subsidiary, Pinnacle Foods Group, had signed a definitive agreement to acquire Birds Eye Foods, Inc. ("Birds Eye") in a transaction valued at $1.3 billion.

Headquartered in Mountain Lakes, New Jersey, Pinnacle Foods Finance LLC—through its wholly-owned operating company, Pinnacle Foods Group—manufactures and markets branded convenience food products in the US and Canada. Its brands include Birds Eye, Voila, Hungry-Man and Swanson frozen dinners, Vlasic pickles, Mrs. Paul's and Van de Kamp's frozen prepared sea food, Aunt Jemima frozen breakfasts, Log Cabin and Mrs. Butterworth's syrup and Duncan Hines cake mixes. Proforma the Birds Eye acquisition, annual net sales approximate $2.5 billion. Substantially all of the capital stock of Pinnacle Foods Finance LLC is owned by investment funds associated with or designated by The Blackstone Group.

The principal methodology used in rating Pinnacle Foods Finance LLC was the Global Packaged Goods Industry Methodology, which can be found at www.moodys.com in the Research & Ratings directory, in the Ratings Methodologies subdirectory. Other methodologies and factors that may have been considered in the process of rating Pinnacle Foods Finance LLC can also be found in the Rating Methodologies subdirectory.

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

New York
Brian Weddington, CFA
VP - Senior Credit Officer
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
USA

Moody's upgrades Pinnacle Foods to B2; rates new debt
No Related Data.
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