Single-A-plus.
In case you were wondering.
Earlier this week, Standard & Poor’s Corp. assigned a solidly upper-midlevel corporate credit rating of “single-A-plus” to Chicago chewing-gum producer Wm. Wrigley Jr. Co.
It’s important to note that S&P didn’t raise or lower its rating on Wrigley; Tuesday’s action was an initial rating assignment.
Although Wrigley has been around for more than a century and went public 88 years ago, until now it has never been rated by a bond-rating agency. The reason? Wrigley has never in its entire 114-year history issued any bonds.
But now, at long last, Wrigley appears to be moving toward its first bond issue.
The company signaled that possibility in early March, when it filed an up to $2 billion “shelf registration” with the Securities and Exchange Commission. A shelf registration is a flexible filing in which corporations register stock, bonds or other securities that they may (or may not) issue over the coming 24 months. The format allows a company to move quickly if it wants to raise money in a hurry.
Wrigley’s March filing came only a matter of months after the company announced in November that it had agreed to pay $1.5 billion to acquire most of Kraft Foods Inc.’s candy business. That deal is expected to close sometime in the current quarter.
The language in its shelf filing did not identify what kind of securities Wrigley might offer, but investors have widely assumed that the company intends to sell bonds in order to fund its pending purchase of Kraft’s LifeSavers and Altoids lines.
With Tuesday’s rating announcement, bond-rating company Standard & Poor’s has given that theory a boost.
Wrigley, S&P said, plans to initially pay for the Kraft transaction by issuing $1.5 billion in “commercial paper” (very short-term debt which matures in nine months or less). It will subsequently sell $1 billion in bonds, and reduce its commercial-paper obligations to $600 million.
The corporate credit rating S&P gave Wrigley is the fifth-highest of 10 investment-level grades. It also assigned a good-quality “single-A-one” rating to Wrigley’s commercial paper.
The ratings, the New York company said, reflect Wrigley’s “strong global position and leading confectionery brands with a concentration in the chewing gum sector.” The pending deal with Kraft promises to “modestly broaden Wrigley’s product portfolio” and provide cost-saving efficiencies, the rating company noted.
Wrigley has an “above-average” credit profile, helped by historically strong profit margins and stable cash flow, S&P continued, but that advantageous profile “is moderated by management’s slightly more aggressive financial policy.”
The rating concern cited a modest $270 million purchase that Wrigley partially financed through a line of credit last year, as well as the coming Kraft transaction, as evidence of Wrigley’s increased willingness to take on debt.
Wrigley officials were not available for comment Wednesday.
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jpmiller@tribune.com
