Campbell Soup May Be Downgraded by Moody's Amid CEO Departure

(Bloomberg) -- Moody’s Investors Service said it may cut Campbell Soup Co.’s credit rating after the company posted a steep drop in profitability and its chief executive officer suddenly stepped down.

All of the company’s ratings are under review, including its Baa2 senior unsecured rating, Moody’s said in a report Monday. That’s only two steps above speculative-grade. Moody’s did not say how many levels the downgrade could amount to.

Campbell Soup has short- and long-term debt of $9.84 billion and its leverage as measured by debt-to-Ebitda -- earnings before interest, tax, depreciation and amortization -- was about five times at the March closing of the Snyder’s-Lance Inc. acquisition. Moody’s says it’s now doubting that the company can meet its expectations to reduce that metric to below four times within two years via cash flow and cost savings.

“The sharp and unexpected decline in profitability in the third quarter casts serious doubt that Campbell will be able to meet its deleveraging plans following the Snyder’s-Lance acquisition,” Moody’s analyst Brian Weddington said in the report. “Additionally, the departure of the CEO adds further uncertainty about whether the company will respond successfully to its operating challenges in the near term.”

A representative for the Camden, New Jersey-based company didn’t immediately respond to a request for comment.

Campbell Soup’s CEO Denise Morrison abruptly resigned on Friday, sending shares down the most in almost two decades. The company also lowered its full-year earnings-per-share forecast below analysts’ estimates and said it will start a strategic review of its businesses, which will “take several months to complete.” It plans to update investors on the outcome when it reports fiscal fourth-quarter results in late August.

The canned-soup maker has been seeking other sources of growth, agreeing to buy Snyder’s-Lance in December in a bid to push deeper into salty snacks -- a bright spot in the struggling packaged-food industry.

Campbell’s stock has fallen 30 percent since the start of the year. The company’s $1 billion of 4.15 percent notes due in 2028 have dropped 1.6 cents on the dollar to 94.9 since the earnings report.

--With assistance from Craig Giammona.

To contact the reporter on this story: Molly Smith in New York at msmith604@bloomberg.net

To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net, Shannon D. Harrington

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