Fitch: U.S. Consumer Companies Unattractive for Leveraged Buyouts

Business Wire, April 30, 2007

NEW YORK -- Fitch Ratings believes that the investment grade-rated segment of the U.S. consumer products industry is not at risk for leveraged buyout activity, as discussed in a report published today.

The consumer products industry continues to exhibit strong free cash flow, high margins, consistent revenues and generally low capital expenditure requirements - all characteristics that would normally make the industry attractive to private equity players. These same characteristics, however, have also resulted in strong enterprise valuations that would make financing difficult to achieve, and/or result in low returns on investment. Furthermore, there exist fewer obvious cost reduction programs that could boost returns, as the sector has already been diligent in removing costs. Restructuring activities have accelerated with rising commodity costs in the recent past.

Fitch's conclusions regarding whether companies are a low LBO risk should not be interpreted to mean that Fitch believes these companies have low event risk. 'Companies with strong cash flow and limited business uses may still feel significant pressure to enact shareholder-friendly actions or recapitalize debt as a pre-emptive measure,' said Thomas Razukas, Managing Director, Fitch Ratings.

An analysis by Fitch of key bank credit agreements and bond indentures found that bondholders have limited protection from highly levered transactions.

The full report 'Consumer Products LBOs: No Attractive Targets in the Investment Grade Arena' can be found on Fitch's web site www.fitchratings.com. The report provides LBO analysis for each of the major segments of the consumer products industry, as well as company-specific analysis for companies rated investment grade by Fitch.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.