Fitch sees post-spin increase in Kraft rating

CHICAGO (Reuters) - Fitch Ratings is likely to upgrade its view of Kraft Foods Inc. (KFT.N: Quote, Profile, Research, Stock Buzz) when the company is spun off from Altria Group Inc.(MO.N: Quote, Profile, Research, Stock Buzz), provided Kraft's debt does not rise sharply, a Fitch analyst said on Tuesday.

"If it's a 100 percent spin-off by Altria and there's not a substantial increase in debt at Kraft, its rating will likely move up," Wesley Moultrie, senior director of Fitch's food, beverage and tobacco team, said at the Reuters Food Summit.

The upgrade would be due to the elimination of any tobacco litigation liability Kraft could face as part of Altria, which is also the parent of cigarette makers Philip Morris U.S.A. and Philip Morris International.

Fitch currently rates Kraft "BBB-plus," while parent Altria is rated "BBB," Moultrie said.

The magnitude of any increase in Kraft's rating would depend on Kraft's overall competitiveness, Moultrie said, pointing out that Kraft is in the second part of a major restructuring, while its margins have also been hurt by higher commodity costs.

"There's several issues going on at Kraft right now in which there's lack of clarity of what its operating earnings would look like on a long-term basis," Moultrie said.