Fitch Rates McDonald's $2.25B Sr. Notes Offering 'A'; Outlook Stable

Business Wire, Feb 26, 2008

CHICAGO -- Fitch has assigned an 'A' rating to McDonald's (NYSE:MCD) $2.25 billion senior unsecured note issuance. The notes were issued in three tranches. $500 million of 5 year notes at 4.3%, $1 billion of 10 year notes at 5.35%, and $750 million of 30 year notes at 6.3%. The company's current ratings are as follows:

--Long-term Issuer Default Rating (IDR) 'A';

--Bank credit facility 'A';

--Senior unsecured debt 'A';

--Subordinated debt 'A-';

--Short-term IDR 'F1'.

The Ratings Outlook is Stable.

McDonald's plans to utilize net proceeds for general corporate purposes. The notes are being issued under the company's existing indenture dated Oct. 15, 1996, which contains limitations on liens, but does not contain financial covenants or any other material covenants.

McDonald's ratings reflect the company's substantial and growing operating income and cash flow from operations, its leading global market position and its well established franchisee network. The ratings consider potential top-line pressure from a slowing U.S. economy, heightened share repurchase activity and the risks associated with the competitive quick-service restaurant market.

For the year ended Dec. 31, 2007, the company's credit statistics were in line with Fitch's expectations. Total debt-to-operating earnings before interest, taxes, depreciation and amortization (EBITDA) and operating EBITDA-to-gross interest expense were 1.4 times (x) and 16.2x respectively. Rent adjusted leverage, defined as total debt plus eight times gross rent expense divided by earnings before interest, taxes, depreciation, amortization and gross rent expense (EBITDAR), was 2.5x. Rent adjusted interest coverage, defined as EBITDAR divided by gross interest expense plus gross rent expense, was 4.4x and the company's free cash flow (FCF) margin was 5.1%.

For further information, see Fitch's 2008 Restaurant Outlook report titled 'U.S. Restaurants/Foodservice: Weakening Economy Will Present Challenges in 2008' dated Feb. 11, 2008, and McDonald's Corporation Credit Update dated Sept. 26, 2007, both available on the Fitch Ratings web site at www.fitchratings.com.

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.