2008-09-08 23:50:02 -

- Fitch Ratings expects to assign the following ratings to Tyson Foods, Inc.'s (Tyson) proposed new debt as outlined below:

--$450 million convertible senior notes due Oct. 15, 2013 'BB';

Fitch also expects to upgrade the following bank debt upon execution of its proposed amendment:

--Secured bank facility to 'BBB-' from 'BB+'.

Fitch has affirmed Tyson's other ratings as follows:

Tyson Foods, Inc.

--Long-term IDR at 'BB+';

--Senior unsecured notes with TFM guarantee due 2016 at 'BB+';

--Senior unsecured notes due 2011 at 'BB';

--Senior unsecured notes due 2018 at 'BB';

--Senior unsecured notes due 2028 at 'BB';

--Short-term IDR at 'B'.

Tyson Fresh Meats, Inc.

--Senior unsecured notes due 2010 at 'BB+';

--Senior unsecured notes due 2026 at 'BB+'.

Lakeside Farm Industries Ltd.

--Term loan at 'BB+'.

The Rating Outlook is Negative. At June 28, 2008, Tyson had approximately $3.1 billion in total debt.

The rating actions follow Tyson's Sept. 4 convertible senior note and class A common stock offering announcement. Tyson intends to offer, subject to market and other conditions, $450 million convertible senior notes with an over-allotment allowance of $67.5 million and up to 23 million shares of its class A common stock. While the offerings are not contingent upon each other, Fitch views the additional liquidity provided by the equity offering positively. Net proceeds from the offerings will be used to repay portions of the outstanding borrowings under Tyson's accounts receivable securitization program and for other general purposes such as acquisitions, strategic investments and initiatives to growth its business.

The convertible notes can be converted at the holders' option under certain conditions, including a stock price premium or discount relative to the pre-set conversion price or the occurrence of specific corporate transactions. Terms include a fundamental change clause that could require the company to purchase the notes at 100% of principal plus accrued and unpaid interest. In addition, the notes rank pari passu with Tyson's senior unsecured notes that do not currently have the TFM guarantee but are junior in right of payment to any secured indebtedness or subsidiary debt. Fitch classifies these convertible notes as 100% debt.

The rating upgrade of Tyson's bank facility reflects expectations that the position of these lenders will improve as a result of the proposed amendment to Tyson's credit agreement which matures Sept. 28, 2010. Tyson has agreed that certain material subsidiaries will provide guarantees and pledge certain assets to secure performance under the credit agreement. Given that Tyson's current maximum leverage covenant falls to 3.25 times (x) for fiscal 2009 on, Fitch anticipates the need to adjust this term.

For the latest twelve months (LTM) ended June 28, 2008, total debt-to-operating earnings before interest, taxes, depreciation and amortization (EBITDA) was 3.8x. During the same period, operating EBITDA-to-gross interest expense was 3.7x and funds from operations (FFO) fixed charge coverage was 2.7x. Tyson's free cash flow margin was negative 0.1%. These credit statistics are currently weak for the rating level.

The Negative Outlook reflects continued operating uncertainty for Tyson and the entire protein sector in the near-term. Additional downgrades could occur if operating earnings and cash flow remain under pressure; the company adopts a more aggressive financial strategy, or there is significant additional deterioration of credit measures. The Outlook could be stabilized if cash flow generation and chicken margins improve significantly.

For additional information, see Fitch June 17 press release 'Fitch Downgrades Tyson's IDR to 'BB+'; Outlook Negative', available 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.

Fitch Ratings, Chicago
Carla Norfleet Taylor, CFA, 312-368-3195
Judi M. Rossetti, CPA, CFA, 312-368-2077
Wesley E. Moultrie II, CPA, 312-368-3186
or
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