Fitch: ConAgra's Ratings Unaffected by Trading & Merchandising Divestiture

Business Wire, March 27, 2008

CHICAGO -- ConAgra Foods, Inc's (ConAgra) (NYSE:CAG) ratings are unaffected by the announcement that it has reached an agreement to sell its Merchandising and Trading Operations (ConAgra Trade Group) to Ospraie Special Opportunities Fund. Upon the closing ConAgra Trade Group will be renamed Gavilon LLC. ConAgra anticipates that it will receive approximately $2.1 billion, composed of $1.6 billion in cash, subject to working capital fluctuations, and $525 million of payment-in-kind debt securities of a newly created Gavilon holding company. The weighted average interest rate on the debt securities is 10.82 percent.

ConAgra is expected to apply the initial projected after-tax cash proceeds from the sale of approximately $1.4 billion, based on current working capital levels, primarily to share repurchases, but also toward debt reduction and internal investment. While ConAgra has not determine the exact amount of total debt reduction Fitch anticipates that the company will apply 30-35% of the net proceeds to reduce debt. In addition, short-term borrowings associated with the Merchandising and Trading Operations will be eliminated. Overall, Fitch expects meaningful debt reduction as a result of the divestiture. Additional positives for the transaction are reduced cash flow volatility and lower working capital requirement which should result in greater stability and a onetime increase in the company's cash flow from operations.

Other provisions of the agreement are: 1) at closing, ConAgra Foods will receive a warrant to acquire an approximate 8% interest in the purchaser; and 2) the Company will also receive an additional $39 million if the senior operating cash flow facility made available to Gavilon; LLC at closing is rated less than investment grade. There is also an earnout provision that runs from the closing through Dec. 21, 2008.

Fitch notes that in order to maintain its current ratings and Outlook, ConAgra will need to improve its volume, pricing and earnings growth from its core Consumer Foods segment. The company intends to achieve these goals by generating cost savings from its restructuring, and focusing its advertising and promotions on priority brands. Fitch will review the transaction upon its closing and discuss with management its financial strategy with regard to the magnitude and the timing of debt reduction.

Fitch rates ConAgra as follows:

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

--Senior unsecured notes 'BBB';

--Bank credit facility 'BBB';

--Subordinated notes 'BBB-';

-Short term IDR 'F2';

-Commercial Paper 'F2'.

The Rating Outlook is Stable. ConAgra had $3.8 billion of debt at Feb. 24, 2008.

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.