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P&G's rating cut following acquisitions

Procter & Gamble Co, the largest US household-goods maker with products ranging from Crest toothpaste to Pampers disposable diapers, had its credit rating cut for the first time since 1991.

Moody's Investors Service on Friday cut Procter & Gamble's long-term rating to "Aa3," the fourth of 10 investment-grade levels, from "Aa2." Recent acquisitions made by Procter & Gamble may hurt the company's ability to meet its debt obligations, Moody's said.

About US$12.4 billion of Procter & Gamble debt is affected by the downgrade, the ratings company said. Moody's didn't change Procter & Gamble's "P-1" short-term rating.

"I don't think it changes the prospect for Procter & Gamble," said Dan Popowics, an equity analyst at Fifth Third Bank, which owns Procter & Gamble shares. "I don't think it has major implications for their stock price or their business."

Standard & Poor's has rated Procter & Gamble's debt "AA" since April 1991, when it downgraded the credit from "AA+." S&P is reviewing the rating for a possible downgrade.

Procter & Gamble has US$9.6 billion of bonds outstanding, almost half of which come due between 2003 and 2006, according to Bloomberg data.

"This isn't unexpected," said Linda Ulrey, a Procter & Gamble spokeswoman. "We anticipated this was a likely occurrence as a result of our plans to acquire Clairol."

Procter & Gamble agreed to buy Bristol-Myers Squibb Co's Clairol unit in May to begin selling hair coloring, sales of which are growing twice as fast as those of household products.

Shares of Cincinnati-based Procter & Gamble, down 8.5 percent this year, rose US$1.45, or 2.1 percent, to US$71.75. The company's 6 7/8 coupon bonds due in 2009 dropped US$2.70 per US$1,000 face value to US$1,092.10.
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