McDonald's Credit Downgraded To Just 3 Notches Above Junk At S&P

By MarketWatch Pulse

McDonald's Corp.'s corporate credit rating was downgraded one notch on Tuesday to BBB+ from A- at Standard & Poor's, which cited the fast food giant's plan to issue more debt to fund returns of cash to shareholders. The outlook is stable, S&P said. The new rating leaves McDonald's debt at three notches above "junk" status. Earlier Tuesday, McDonald's said it would finance about $10 billion in cash returns to shareholders by issuing debt, acknowledging that the announcement would likely lead to a credit downgrade. "Overall, we believe this approach marks a significant and rapid shift in financial policy for the company," S&P said in a statement. "We would lower the rating if the company increases its return of capital to shareholders beyond current planned levels while experiencing limited improvement in customer response (improved traffic and positive comparable sales in the U.S. for example) during the next year to 18 months." The stock, which tacked on 0.2% in afternoon trade, has soared 21% year to date, while the Dow Jones Industrial Average has slipped 0.4%.

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