Duff & Phelps Credit Rating Co. (DCR) has assigned a rating of ‘AA+’ (Double-A-Plus) to McDonald’s Y30 billion issue of global bonds in two tranches. The first tranche is Y15 billion of 1.25 percent bonds due 2005, and the second tranche is Y15 billion of 2 percent bonds due 2010. DCR rates McDonald’s existing $7 billion of U.S. dollar and foreign-denominated debt as follows: the senior debt is rated ‘AA+’ (Double-A-Plus), the subordinated debt is rated ‘AA’ (Double-A) and the commercial paper is rated ‘D-1+’ (D-One-Plus). The Rating Outlook is Stable.
The ratings reflect McDonald’s prominence in the quick service restaurant industry, with high brand awareness and efficient operations leading to strong profitability. The company owns approximately 44 percent of its restaurant sites around the world, giving it a sizable asset base and considerable control of occupancy costs.
McDonald’s strong operating cash flow should easily meet funds needed for capital expenditures and dividends. Although the company’s $3.5 billion share repurchase program is large, it is viewed as highly discretionary. The program, which is partially financed with debt, is balanced against McDonald’s commitment to maintain strong credit protection measures, and is expected to have minimal effect on leverage.
DCR is a leading global rating agency with 34 local market offices providing ratings and research on debt issues and insurance claims paying ability in more than 50 countries. For additional research on McDonald’s, visit DCR’s web site at www.dcrco.com (Quick Search: McDonald’s). DCR’s research is also available on Bloomberg at DCR, First Call’s BondCall Direct/Research Direct at www.firstcall.com and Multex at www.multex.com, as well as through other third-party providers.
