OREANDA-NEWS. Fitch Ratings has assigned a 'BBB+' rating to General Mills, Inc.'s (General Mills), issuance of EUR500MM senior unsecured notes due January 2020. The Rating Outlook is Stable.

The company plans to refinance upcoming maturities with the proceeds. The company has a $250 million floating rate note (FRN), a $500 million FRN and a $250 million .875% note, all of which are due between Jan. 28 and 29 2016. This represents $1 billion of the $1.1 billion due this year. The notes rank pari passu with General Mills' other senior unsecured debt and contain a Change of Control provision at 101. The notes are issued under the company's indenture dated Feb. 1, 1996.

A full list of ratings follows at the end of this release.

KEY RATING DRIVERS

Leverage Returns to Mid-2x, Expectations Met Early: The company's leverage had temporarily increased to over 3.2x with the Annie's acquisition in 2014. As expected, General Mills has been focused on deleveraging and cash on hand and proceeds from the Green Giant brand sales were used to reduce debt balances with leverage returning to 2.6x at Nov. 29, 2015. Leverage is expected to remain stable in the mid-2x times range in 2016.

Strong Margins, Brands: General Mills's ratings incorporate the company's strong profitability, substantial internally generated liquidity, and leading market positions in key categories. Fitch considers General Mills to have one of the best product portfolios in the industry, with strong brand equities and marketing expertise in large categories that span a variety of meals and snacks. The company maintains significant brand equity in major product categories including cereal, yogurt, ready-to-serve soup, and snacks. Fitch expects organic top line growth of 1% annually. The company's 20% EBITDA margin is generally among the sector's top tier and Fitch expects modest improvement given current restructuring initiatives. Credit strengths are balanced with General Mills' high priority for returning cash to shareholders.

FCF Improved: After averaging approximately $850 million during the past five years, the current run rate is a much improved $985 million. Fitch expects FCF to be $900 million to $1 billion annually going forward.

KEY ASSUMPTIONS

ASSUMPTIONS:
--Low single-digit organic sales growth for fiscal 2016 and fiscal 2017;
--FCF is expected to be $900 million to $1 billion annually in fiscal 2016 and fiscal 2017;
--Fitch expects leverage will remain in the mid 2x range.

RATING SENSITIVITIES
Future developments that may, individually or collectively, lead to a negative rating action include:

--A negative rating action could occur if operating earnings remain under pressure and debt reduction does not occur, resulting in a sustained period of leverage (total debt-to-operating EBITDA) greater than approximately 3x and weakening FCF.

Future developments that may, individually or collectively, lead to a positive rating action include:

A ratings upgrade is unlikely in the near- to intermediate-term but could occur in the long term if the company commits to maintain leverage in the low 2x range while generating FCF at historical average annual levels or higher. A commitment to refrain from large debt-financed share repurchases or acquisitions would also support an upgrade.

LIQUIDITY

Ample Liquidity: The company maintains $2.7 billion of undrawn committed credit facilities that support its CP program, consisting of a $1 billion facility expiring in May 2019 and a $1.7 billion facility expiring in April 2017. In addition, Yoplait SAS has a EUR200 million revolver due in June 2019 that General Mills consolidates. General Mills had $2.8 billion available on its total of $2.9 billion committed facilities as of the most recent quarter end. The remaining $100 million is under the Yoplait facility.

Debt maturities are high in calendar 2016 with $1.1 billion due, all except $100 million in at the end of January 2016 and $1.5 billion in calendar 2017. Fitch expects that General Mills will refinance much of its near-term maturities and today's action is in accordance with our expectations.

FULL LIST OF RATING ACTIONS

Fitch currently rates General Mills and its subsidiaries as follows:

General Mills, Inc.
--Long-term Issuer Default Rating (IDR) 'BBB+';
--Senior unsecured debt 'BBB+';
--Senior unsecured credit facilities 'BBB+';
--Short-term IDR 'F2';
--CP 'F2'.

General Mills Cereals LLC
--Long-term IDR 'BBB+';
--Class A limited membership interests 'BBB+'.

Yoplait S.A.S.
--Long-term IDR 'BBB+';
--Credit facility 'BBB+'
--Senior unsecured debt 'BBB+'.

The Rating Outlook is Stable.