Dole debt upgraded by Fitch

Fitch Upgrades Dole's IDR to 'B'; Outlook Stable

CHICAGO--(BUSINESS WIRE)--Fitch Ratings has upgraded the ratings of Dole Food Company, Inc. (Dole) and Solvest Ltd as follows:

Dole (Operating Company)

--Long-term Issuer Default Rating (IDR) to 'B' from 'B-';

--Secured asset-based (ABL) revolver to 'BB/RR1' from 'BB-/RR1';

--Secured term loan B to 'BB/RR1' from 'BB-/RR1';

--Third-lien secured notes to 'B+/RR3' from 'B-/RR4';

--Senior unsecured debt to 'CCC/RR6' from 'CC/RR6'.

Solvest Ltd. (Bermuda-based Subsidiary)

--Long-term IDR to 'B' from 'B-';

--Secured term loan C to 'BB/RR1' from 'BB-/RR1'.

On Oct. 10, 2009, Dole had approximately $2.3 billion of consolidated debt, $102 million of unrestricted cash and $302.5 million of restricted cash on deposit for the payoff of its $363 million 7.25% notes due June 15, 2010.

The Ratings Upgrades:

The upgrades reflect the significant level of debt reduction following Dole's Oct. 22, 2009 initial public offering (IPO), the elimination of near-term refinancing risk and continued improvement in the company's cash flow. Fitch estimates Dole's pro forma debt, post the Oct. 22, 2009 IPO and subsequent use of the majority of net proceeds for debt reduction, to be approximately $1.7 billion.

Dole received $415 million of net proceeds from its IPO and used approximately $381 million to repay debt. Debt repaid includes the following: $130 million of its 8.875% unsecured notes due 2011 on Nov. 30, 2009, $119 million of its 13.875% third-lien notes due March 15, 2014 on Nov. 27, 2009, $85 million of holding company debt transferred to the company as a result of the merger of DHM Holdings into Dole, and $47 million borrowings under its ABL revolver.

On Oct. 26, 2009, Dole redeemed all of its $363 million of 7.25% unsecured notes due June 15, 2010 using proceeds from the issuance of $315 million secured notes on Sept. 25, 2009. Proceeds from this issuance were deposited in a restricted trust account for the purpose of repaying this debt. The refinancing of the 2010 maturity along with the repayment of $130 million of its $200 million 8.875% unsecured notes due 2011 has eased the near-term refinancing concerns Fitch had regarding the company.

For the latest 12-month (LTM) period ended Oct. 10, 2009, operating earnings, before, interest, taxes and depreciation (EBITDA), excluding gains from asset sales and other non-operating income, was $407 million. Based on Fitch's estimate of total debt pro forma for the IPO and subsequent debt reduction, Dole's total debt-to-operating EBITDA approximates 4.1 times (x). This is considerably lower than the 5.7x at the year ended Jan. 1, 2009.Fitch believes Dole can maintain average leverage in the 4.0x to 5.0x range absent any unanticipated shocks to product and distribution costs in the near- to intermediate-term. Upcoming maturities are limited to $70 million 8.875% unsecured notes due March 15, 2011 and $155 million of unsecured notes due July 15, 2013. The company's ABL revolver expires April 12, 2011.Recovery prospects for Dole's third-lien notes have improved as Fitch previously anticipated due to the company's debt reduction. The 'RR1' rating on Dole's secured bank debt reflects the fact that recovery prospects on this debt remain outstanding at 91%-100%. The 'RR3' rating on the company's third-lien secured
notes indicates good recovery prospects of 51%-70%. And finally, the 'RR6' rating on the ompany's senior unsecured debt reflects Fitch's belief that recovery would be below 10% if there was an event of default.

European Banana Tariffs:

Dole's cash flow should benefit from the pending reduction of the current 176 euro/metric ton import tariff on bananas sourced from Latin America and sold into the European Union. The current tariff has been in place since Jan. 1, 2006 but is expected to be reduced 16% to 148 euro/metric ton beginning in 2010 and then by a total of 35% to 114 euro/metric ton by 2016. Dole anticipates that its costs will fall about $15 million in 2010 and then by a total of $35 million annually by 2016. Fitch views the reduction positively and has incorporated the tariff decline into its near- to intermediate-term financial projections for Dole.

Recent Operating Performance:

For the nine months ended Oct. 10, 2009, consolidated revenue declined 12% to $5.2 billion. Excluding divestitures, the decline was 7% and was approximately 4% excluding $187 million of unfavorable currency movements. Dole reported operating income growth of 32% to $275.6 million. Operating income would have been lower by approximately $10 million excluding the benefits of currency. The biggest drivers to operating income growth were improvement in the profitability of the company's Packaged Foods and Fresh Vegetables segments. The company had lower product, shipping and distribution costs along with better pricing in Packaged Foods. Fitch does not expect Dole's cost frontier to be as favorable in 2010 due to the potential for higher packaging and bunker fuel expenses. Dole has indicated that it has minimal bunker fuel hedges currently in place for fiscal 2010.For the LTM period ended Oct. 10, 2009, Dole generated $277 million of free cash flow (FCF)(defined as cash flow from operations less capital expenditures and dividends), after producing negative FCF annually since 2005. Operating cash flow has benefited from higher operating income and significant improvements in working capital. Fitch does not expect FCF generation to remain at current high levels, given the on-going volatility of the fresh produce industry.

Liquidity:

On Oct. 10, 2009, Dole's $340.5 million of liquidity included $102 million of unrestricted cash and $238.5 million available, excluding approximately $91.6 million of letters of credit, under its $350 million ABL revolver. Dole's ABL matures on April 12, 2011, and as of Oct. 10, 2009 had a borrowing base of $330.1 million.

Dole's targeted $200 million of asset sales for fiscal 2009 further improve the company's liquidity. Year-to-date through the third-quarter ended Oct. 10, 2009, cash received from divestitures totalled $94.4 million. Following the close of the third quarter, Dole sold three box plants, in addition to one sold during the third quarter. Total proceeds from these asset sales are expected to be approximately $100 million. Dole has earmarked these proceeds for debt reduction.