Fitch Revises Outlook On General Mills Rating To Negative After Two Years Of Revenue Weakness

By Ciara Linnane Markets MarketWatch Pulse

Fitch Ratings on Friday revised the outlook on General Mills Inc.'s BBB-plus rating to negative from stable, citing concerns the food company will be unable to stabilize revenue after two years of weakness in categories including cereal, yogurt and convenient meals. "Fitch currently expects EBITDA to remain flat within the $3.4 billion to $3.5 billion range over the next three years, with adjusted leverage remaining around the current 2.8 times level," the rating agency said in a statement. "This assumes that revenue trends improve to negative 1% by fiscal year 2019." Fitch could downgrade the rating if revenue remains stressed and EBITDA declines to less than $3.2 billion and leverage above 3 times, it said. The revised outlook also reflects the company's increased share buybacks, which reward shareholders but are a negative for bond holders. General Mills most active bonds, the 3.20% notes due in October of 2027 were trading at 98.469 cents on the dollar, according to MarketAxess. Shares were flat, but are down 6.4% in 2017 so far, while the S&P 500 has gained 5.5%.

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