Fitch Affirms Hasbro's IDR at 'BBB+'; Outlook Stable

CHICAGO--(BUSINESS WIRE)-- Fitch Ratings has affirmed the following ratings on Hasbro, Inc. (Hasbro):

--Issuer Default Rating (IDR) at 'BBB+';

--Unsecured bank facility at 'BBB+';

--Senior unsecured notes at 'BBB+'.

Approximately $1,524 million in unsecured notes and the $300 million unutilized revolving credit is affected by this action. The Rating Outlook is Stable.

Hasbro's ratings reflect the company's leading position in the traditional toy industry with revenues of $4 billion, its broad portfolio of highly diverse brands and its significant liquidity. Furthermore, Hasbro's highly variable cost structure allows it to have higher EBITDA margins than many of its large peers. The ratings also incorporate potential revenue pressure caused by a fragile economic recovery and risk factors inherent to the toy industry. Industry concerns include a concentration of sales to Wal-Mart, Toys 'R' Us and Target; low barriers to entry; fashion risk; and high levels of seasonality regarding profitability and working capital usage.

The Stable Outlook is based on the company's operating trends and the strong slate of toy related entertainment that should support solid revenue growth through the medium term. However, Fitch notes that potential uncertainty surrounding the success of entertainment related toy sales, which are a moderately high percentage of Hasbro's revenues, can cause volatility in earnings and cash flow. Nonetheless, entertainment properties such as Star Wars, the various toy related sales connected with the Marvel contract and Hasbro's own Transformers brand has proven to be reliable over the past three to four years providing stability to revenues. Hasbro has locked in its key contractual relationships through at least 2017. All of these activities plus further international market penetration over time should support solid single digit revenue growth excluding foreign exchange in the medium term.

The ratings and Outlook consider the fact that Hasbro has not met its public leverage (defined as debt/EBITDA) goal of approximately 1.5 times (x) at March 31, 2010. Hasbro issued $500 million in debt to buyback shares and offset the dilution caused by its convertible debentures. Hasbro's public financial goals are an important consideration to the rating and Outlook. Fitch expects the company to meet its leverage and interest coverage goals by the end of 2011. Debt balances are not expected to increase until the goals are met. Free cash flow is expected to improve over the $342 million recorded in the last 12 months.

Hasbro has ample liquidity as exemplified by $1.26 billion in cash and $298.6 million in revolver availability at March 31, 2010. The $500 million issuance in March 2010 will be used to fund share buybacks from the convertible dilution temporarily inflates the company's cash balance, Fitch expects cash balances to remain near its historical $600 million to $700 million level. Hasbro has no debt maturities until 2014 when approximately $425 million of 6.125% senior unsecured notes become due.

Additional information is available at www.fitchratings.com.

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CONTACT:

Fitch Ratings
Grace Barnett, CPA, +1-212-908-0718 (New York)
Carla Norfleet Taylor, CFA, +1-312-368-3195 (Chicago)
Wesley E. Moultrie, CPA, +1-312-368-3186 (Chicago)
Media Relations
Cindy Stoller, +1-212-908-0526 (New York)
cindy.stoller@fitchratings.com

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