Campbell Soup may be downgraded amid CEO departure

NEW YORK: 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. 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 US$9.84bil and its leverage as measured by debt-to-EBITDA – earnings before interest, tax, depreciation and amortisation – was about five times at the March closing of the Snyder’s-Lance Inc acquisition.

Moody’s said it’s now doubting that the company could meet its expectations to reduce that metric to below four times within two years via cashflow 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’sLance 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 oper- ating 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 last 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 would start a strategic review of its businesses, which would “take several months to complete.”

It plans to update investors on the outcome when it reports fiscal fourth-quarter results in late August.