Fitch Downgrades Tyson's IDR to 'BB+'; Outlook Negative

Business Wire, June 17, 2008

CHICAGO -- Fitch Ratings has downgraded the ratings for Tyson Foods, Inc. (Tyson)(NYSE:TSN) and its subsidiaries as follows:

Tyson

--Issuer Default Rating (IDR) to 'BB ' from 'BBB-';

--Unsecured bank facility to 'BB ' from 'BBB-';

--6.85% 2016 senior unsecured notes to 'BB ' from 'BBB-';

--8.25% 2011 senior unsecured notes to 'BB' from 'BBB-';

--7.0% 2018 senior unsecured notes to 'BB' from 'BBB-';

--7.0% 2028 senior unsecured notes to 'BB' from 'BBB-';

--Short-term IDR to 'B' from 'F3';

--Commercial paper to 'B' from 'F3'.

Tyson Fresh Meats, Inc. (TFM)

--7.95% 2010 senior unsecured notes to 'BB ' from 'BBB-';

--7.125% 2026 senior unsecured notes 'BB ' from 'BBB-';

Lakeside Farm Industries Ltd. (Lakeside)

--Term loan to 'BB ' from 'BBB-'.

The Rating Outlook is Negative.

At March 29, 2008, Tyson had approximately $3 billion in total debt.

The downgrade reflects expectations that Tyson's credit statistics will continue to deteriorate in the near term due to lower than anticipated operating earnings and cash flow. Higher than predicted grain cost and the length of time required to pass these costs on, through pricing, is reducing the profitability of the company's poultry operations, which typically generates a significant portion of the company's cash flow.

The ratings also factor in the value of the company's beef assets organized under TFM which has guaranteed a portion of Tyson's unsecured debt obligations. Debt obligations of Tyson, including outstanding balances on its bank facility and the $990 million (as of March 29, 2008) of 6.85% notes due 2016, which are guaranteed by TFM, have been downgraded one notch to 'BB ' while debt that does not have the benefit of this guarantee has been downgraded two notches to 'BB'. Debt issued directly at the TFM or Lakeside subsidiary level, which is structurally senior to Tyson's other debt that does not have the TFM guarantee, has been downgraded one notch to 'BB '.

The Negative Outlook reflects the risk that operating cost pressures could accelerate significantly. Additionally, uncertainty regarding the sustainability of the current outperformance in Tyson's pork segment and the longer-term profitability of its beef operations remains. Further downgrades could be triggered by a prolonged period of higher than expected leverage while the outlook could be stabilized if cash flow generated from the chicken segment normalizes and the company demonstrates the ability to sustain credit statistics appropriate for the current ratings.

During the first half of fiscal 2008, consolidated cash flow from operating activities declined 58% to $144 million due primarily to higher grain costs in the chicken segment and increased inventory requirements. Operating income improved dramatically in the pork segment, which experienced 390 basis points of margin expansion to 8.4%, due primarily to lower live hog input costs. However, this was more than offset by considerable declines in the chicken and beef segments which experienced an operating loss of $26 million and $96 million, respectively, down from the $134 million and $1 million of operating income earned during the first half of the previous year.

While liquidity is currently not an issue for Tyson and the company does not have material near term maturities, this operating performance resulted in credit statistics that are weak for the investment grade level. For the latest twelve month period ended March 29, 2008, total debt-to-operating EBITDA was 3.0 times (x), operating EBITDA-to-gross interest expense was 4.4x and FFO (funds from operations) fixed charge coverage was 3.0x.

Tyson currently expects incremental grain cost to exceed $600 million in fiscal 2008; up from the additional $334 million absorbed in fiscal 2007. The company is also projecting a $400 million increase in the cost of other ingredients such as cooking oil and breading in fiscal 2008. The combination of price increases, hedging and, to a lesser extent, productivity initiatives are expected to only partially help offset these higher operating costs in the near term. Due to the contract nature of the business, the reluctance of industry players to meaningfully reduce supply, the magnitude and the continued escalation of grain prices, these costs are being passed along slower than Fitch originally anticipated.

Tyson's ratings consider the company's significant size and diversification among the various meat proteins. These considerations are balanced against a high level of business risk and volatility in its financial performance. While not anticipated, Fitch is cognizant that unpredictable shocks; such as disruptions in exports or incidences of food-borne illnesses, to global supply and demand can have considerable effects on Tyson's operating and financial performance. Since each of these situations must be evaluated individually, they have not been factored into the ratings.

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.