(This is an amendment of a release issued earlier today. It clarifies that the notes were issued under the company's existing European Medium Term Note Program.)
Fitch Ratings has assigned an 'A' rating to McDonald's (NYSE:MCD) EUR300 million (approximately $429 million) 4.25% seven-year senior unsecured notes due June 10, 2016. The notes were issued under the company's European Medium Note program and rank pari passu with McDonald's existing debt.
McDonald's current ratings are as follows:
--Long-term Issuer Default Rating (IDR) 'A';
--Bank credit facility 'A';
--Senior unsecured debt 'A';
--Short-term IDR 'F1'.
The Rating Outlook is Stable. On March 31, 2009, total debt was $10.4 billion. Liquidity included approximately $2 billion of cash and a $1.3 billion undrawn committed line of credit.
McDonald's ratings reflect the company's substantial cash flow generation, which resulted in $1.5 billion of free cash flow after capital expenditures and dividends during the latest 12 month period ended March 31, 2009, its leading global market position and its proven operating strategy. McDonald's has generated 23 consecutive quarters of same-store sales (SSS) growth and consistently produces industry-leading margins. The company's strong performance is attributed to its established franchisee network, which provides a sizeable royalty stream; integrated procurement and logistics systems; and its well-executed new product development, as demonstrated by the current success of its McCafe U.S. specialty beverage rollout.
Despite a difficult restaurant sales environment caused by the economic recession and rising unemployment, McDonald's global comparable same-store sales increased 5% for the year-to-date period ended April 30, 2009. Although revenue and operating income have been negatively impacted by currency translation, McDonald's overall profitability continues to improve. During the first quarter ended March 31, 2009, the company's operating margin increased 150 basis points (bps), 80 bps on a constant currency basis, to 27.6%.
For the latest 12-month (LTM) period ended March 31, 2009, McDonald's credit statistics were in line with Fitch's expectations. Total debt-to-operating earnings before interest, taxes, depreciation and amortization (EBITDA) and operating EBITDA-to-gross interest expense were 1.4 times (x) and 14.0x, respectively. Rent-adjusted leverage, defined as total debt plus eight times gross rent expense divided by earnings before interest, taxes, depreciation, amortization and gross rent expense (EBITDAR), was 2.5x. Rent adjusted interest coverage, defined as EBITDAR divided by gross interest expense plus gross rent expense, was 4.4x and funds from operations (FFO) fixed charge coverage was 4.0x. FFO fixed charge coverage is defined as funds from operations plus gross interest expense plus preferred dividends plus rent expense divided by gross interest expense plus preferred dividends plus rent expense.
For further information, see the related McDonald's Credit Analysis dated May 13, 2009 available on Fitch's web site at www.fitchratings.com.
Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.
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Fitch Ratings, Chicago
Carla Norfleet Taylor, CFA, +1-312-368-3195
Judi
M. Rossetti, CFA, CPA, +1-312-368-2077
Wesley E. Moultrie II, CPA,
+1-312-368-3186
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Cindy Stoller,
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cindy.stoller@fitchratings.com