Moody’s Downgrades Tyson’s Credit Outlook
Moody’s Investors Service has downgraded Tyson Foods Inc.’s credit outlook to negative from stable, citing the company’s plans to refinance its debt. The downgrade comes as Tyson is preparing to refinance its debt, which is due to mature in 2024.
Tyson, the largest U.S. meat processor, has been struggling with weak demand for its products due to the coronavirus pandemic. The company has been forced to close some of its plants and lay off workers as it struggles to stay afloat.
Moody’s said that Tyson’s credit outlook was downgraded due to the company’s “high leverage and weak operating performance.” The ratings agency noted that Tyson’s debt-to-EBITDA ratio was 5.2 times at the end of the third quarter, which is higher than the 4.5 times that Moody’s considers to be the upper limit for a company with a stable outlook.
Moody’s also noted that Tyson’s operating performance has been weak due to the pandemic. The company reported a net loss of $1.2 billion in the third quarter, compared to a net income of $1.1 billion in the same period last year.
Moody’s said that Tyson’s debt refinancing plans could put additional pressure on the company’s credit profile. The ratings agency noted that Tyson’s debt load is expected to increase as the company refinances its debt.
Moody’s said that Tyson’s credit outlook could be upgraded if the company is able to reduce its debt-to-EBITDA ratio and improve its operating performance. The ratings agency also noted that Tyson’s credit outlook could be downgraded further if the company’s debt-to-EBITDA ratio increases or if its operating performance does not improve.
Tyson’s Refinancing Plans
Tyson is planning to refinance its debt in order to reduce its interest payments and extend the maturity of its debt. The company is planning to issue new debt and use the proceeds to pay off its existing debt.
Tyson has already secured commitments from several banks to provide financing for the refinancing. The company is also in talks with other banks and investors to secure additional financing.
Tyson is hoping to complete the refinancing by the end of the year. The company is also planning to issue new shares of its common stock to raise additional funds.
Tyson’s Financial Position
Tyson has been struggling financially due to the pandemic. The company reported a net loss of $1.2 billion in the third quarter, compared to a net income of $1.1 billion in the same period last year.
Tyson’s debt-to-EBITDA ratio was 5.2 times at the end of the third quarter, which is higher than the 4.5 times that Moody’s considers to be the upper limit for a company with a stable outlook.
The company’s cash flow has also been weak due to the pandemic. Tyson reported a cash flow from operations of $1.2 billion in the third quarter, compared to $2.2 billion in the same period last year.
Tyson’s Outlook
Tyson is hoping that its debt refinancing plans will help improve its financial position. The company is also hoping that its operating performance will improve as the pandemic subsides.
Moody’s said that Tyson’s credit outlook could be upgraded if the company is able to reduce its debt-to-EBITDA ratio and improve its operating performance. The ratings agency also noted that Tyson’s credit outlook could be downgraded further if the company’s debt-to-EBITDA ratio increases or if its operating performance does not improve.
Tyson is hoping that its debt refinancing plans will help improve its financial position and allow it to weather the pandemic. The company is also hoping that its operating performance will improve as the pandemic subsides.
Only time will tell if Tyson’s debt refinancing plans will be successful. If the company is able to reduce its debt-to-EBITDA ratio and improve its operating performance, then its credit outlook could be upgraded. If not, then its credit outlook could be downgraded further.