(The following statement was released by the rating agency)

Dec 31 - Fitch Ratings has assigned a 'BBB-' to ConAgra Foods Inc's. (Conagra) new $1.5 billion five-year senior unsecured term credit

facility (term facility) and $4.5 billion 364-day bridge credit facility (bridge

facility). On Dec. 27 and 28 ConAgra filed or announced a series of corporate

actions associated with financing its acquisition of Ralcorp Holdings, Inc.

(Ralcorp). The $6.8 billion acquisition, which included assumed debt, was

expected to be predominantly debt-financed.

Specifically, on Dec. 27 the company filed that on Dec. 21, 2012 it had

established the $1.5 billion unsecured term loan and the $4.5 billion unsecured

364-day bridge facility and also amended its current $1.5 billion revolving

credit agreement. On Dec. 28, 2012 the company also announced an exchange offer

for up to $750 million in Ralcorp notes.

Pursuant to the exchange offering, Fitch expects to rate ConAgra senior

unsecured notes issuance (new notes) 'BBB-'. Fitch's ratings of ConAgra's debt

are listed below.

The new notes will rank equal to the company existing senior unsecured

indebtedness. The securities will be exchanged for any and all of Ralcorp

Holdings, Inc. (Ralcorp) existing 4.950% notes due Aug. 15, 2020 for up to an

aggregate principal amount of $300 million and for its existing 6.625% notes due

Aug. 15, 2039 up to an aggregate principal amount of $450 million. The new notes

are expected to be issued with identical interest rates and maturity terms as

the Ralcorp notes. The early tender offer exchange date for the existing Ralcorp

notes is Jan. 14, 2013; the expiration date is Jan. 29 2013

Proceeds under the bridge and term facilities are expected to be used to fund

the company's acquisition of Ralcorp Holdings, Inc. (Ralcorp). The term facility

may be increased to up to $2.0 billion, matures on the fifth anniversary of the

acquisition closing date, and amortizes 2.5% per quarter commencing on June 1,

2013. Fitch anticipates that the company will refinance any borrowings under the

bridge facility.

The bridge and term loan have similar requirements as the revolver but loosens

the leverage covenant to accommodate the acquisition in the near term.

Additionally there is also a spring-in guarantee in certain events. The existing

revolver was amended on Dec 21, 2012 to harmonize with changes in the new

facilities. The key change to the leverage covenant was that consolidated funded

debt must not exceed 75% of the consolidated capital base for four quarters

including the acquisition quarter and 70% for the following four quarters before

reverting to the original 65%. Further, if the company's debt is non-investment

grade upon closing then all material wholly-owned domestic subsidiaries must

guarantee the obligations. The guarantees would be released when the company

becomes investment grade. The company is expected to remain in compliance with

its covenants.

The acquisition is expected to close by March 31, 2013, pending Ralcorp's

shareholders' and regulatory approvals. The combined company will be one of the

largest packaged food companies in North America, with net sales of

approximately $18 billion. In addition to the company's significant branded food

presence, ConAgra will be the largest private-label food company in the U.S.,

increasing ConAgra's approximately $950 million private-label sales to $4.5

billion. Revenue sources will be more balanced, consisting of 43% branded and

25% private-label packaged foods through the retail channel and 32% to the

commercial/foodservice markets.

ConAgra's leverage will increase substantially with this combination, resulting

in financial metrics that are weak for the rating category in the near term.

Fitch estimates that pro forma total debt to EBITDA will initially be slightly

more than 4.0x, factoring in the use of a portion of ConAgra's $476.8 million

cash at Nov. 25, 2012. Nonetheless, the company's commitment to de-leveraging,

good liquidity, and the strength of the strategic combination support the 'BBB-'

ratings.

Fitch has factored into the ratings ConAgra's commitment to prioritize its free

cash flow (FCF) for debt reduction within 18 to 24 months after the transaction

closes. Maintaining the current dividend level and very modest share repurchases

should support the significant debt reduction needed to retain investment-grade

ratings. Fitch believes ConAgra's target of approximately $225 million in annual

cost savings by the fourth full fiscal year after the closing, driven by supply

chain and SG&A efficiencies, will be achievable, based on similar transactions.

However, Fitch believes the near-term benefit is likely to be outweighed by

costs to achieve those synergies.

The acquisition of Ralcorp is in line with ConAgra's strategic growth objective

to increase its exposure to private label. Private label historically has grown

faster than branded packaged food. The transaction has good strategic rationale

as both companies operate primarily in the center of the store in complementary

categories without significant overlap between branded and private-label

products. ConAgra will benefit from Ralcorp's higher margin predominantly

private-label portfolio. However, with both companies operating primarily in the

United States, this transaction does not broaden their geographic exposure to

faster growing markets. Both companies have recently been highly acquisitive,

and that is also taken into consideration for the ratings. Acquisitions are not

anticipated until leverage is solidly in line with the rating level.

ConAgra is expected to maintain adequate liquidity, including a portion of its

cash balance, and a substantial part of its currently undrawn $1.5 billion

revolving credit facility that matures Sept. 14, 2016. The credit facility

provides backup to ConAgra's commercial paper (CP) program.

Upcoming long-term debt maturities are manageable. Fitch anticipates ConAgra is

likely to refinance and/or use cash to pay down part of its next significant

debt maturities, which are $500 million 5.875% notes due in April 2014 and $250

million 1.35% notes due Sept. 10, 2015.

What Could Trigger a Rating Action

Future developments that may, individually or collectively, lead to a negative

rating action include:

--If ConAgra's planned debt reduction falters significantly, which could occur

due to shortfalls in earnings/cash flow, such that leverage remains at or above

the mid-3.0x range.

Future developments that may, individually or collectively, lead to a positive

rating action include:

-- A positive rating action is not anticipated in the near term. Beyond this

timeframe, a positive rating action could be supported by substantial and

growing FCF generation, along with leverage (total debt-to-operating EBITDA)

consistently in the mid-2x range.

--Maintenance of conservative financial policies, such as publicly stating that

its financial strategies no longer include large acquisitions that require

substantial debt financing, could also support an upgrade.

Fitch currently rates ConAgra Foods, Inc. as follows:

--Long-term Issuer Default Rating (IDR) 'BBB-';

--Senior unsecured notes 'BBB-';

--$1.5 Revolving Credit Agreement 'BBB-';

--$1.5 billion 5 year senior unsecured term credit facility 'BBB-';

--$4.5 billion 364 day bridge credit facility;

--Subordinated notes 'BB+';

--Short-term IDR 'F3';

--CP 'F3'.

(Caryn Trokie, New York Ratings Unit)

Keywords:

(Caryn.Trokie@thomsonreuters.com; 646-223-6318; Reuters Messaging: rm://caryn.trokie.reuters.com@reuters.net)

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