NEW YORK (Thomson Financial) - Shares of Smithfield Foods Inc. plunged to a
more than four-year low on Friday after Standard & Poor's lowered its credit
rating on the company to BB- from BB+.
The shares fell 11.5% to $21.76 in late afternoon trading. They earlier hit
an intraday low of $21.51, representing the worst price for the shares since
January 2004.
Standard & Poor's said the downgrade reflected weak credit metrics for the
rating and the belief that credit measures wouldn't rebound "to more appropriate
levels" in the near term.
"In our view, Smithfield Foods faces a challenging operating environment in
its hog production segment through much of fiscal 2009 due to higher feed costs
and soft hog prices," the credit rating agency added.
Standard & Poor's said that the ratings remain on Credit Watch until the
company's beef division is divested to JBS S.A. If the proceeds of the deal are
used to repay debt, the company's ratings would likely be affirmed, S&P said.
"However, if this deal is not completed, we would re-evaluate Smithfield
Foods' financial profile and would expect that the rating would not be lowered
by more than one notch."
Standard & Poor's also assigned a "1" recovery rating to the food company,
believing there was a very high expectation for a recovery in the event of a
payment default.
Ryan Vlastelica
rv/vj
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