Standard & Poor’s Ratings Services lowered its outlook on Dole Food Co.
after the company completed a $1.69 billion divestiture of several of its business lines.
S&P affirmed Dole’s corporate credit rating at B, five notches into junk territory. The outlook was lowered to stable, from positive.
Dole earlier this week completed the sale of its global packaged foods and Asia fresh produce businesses to Itochu Corp. (ITOCY, 8001.TO) in a deal aimed at narrowing its focus. It also unveiled a $775 million refinancing initiative, saying it will use the proceeds from both transactions to pay down debt.
S&P said the deal weakens Dole’s business risk profile.
“We believe the divestiture reduces Dole’s product diversity and profitability as the surviving commodity-like produce business will be characterized by more-volatile earnings,” said S&P analyst Jeff Burian.
S&P could consider an upgrade if Dole improves its credit measures, perhaps by increasing revenue and margins.
The firm could lower the ratings if the company’s leverage increases.
Dole last month said it swung to a fourth-quarter loss as it recorded weaker fresh-fruit sales due to the divestiture, and was impacted by costs related to the deal.
Shares edged up 3 cents to $10.61 in light after-hours trading. Through the close, the stock was down 7.8% since the start of the year.
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