Fage will use the proceeds of the proposed issuance to refinance some of its existing debt, finance further US manufacturing capacity expansion and for general corporate purposes.

Moody's issues provisional ratings in advance of the final sale of securities and these ratings reflect Moody's preliminary credit opinion regarding the transaction only. Upon a conclusive review of the final documentation, Moody's will endeavour to assign a definitive rating to the notes. A definitive rating may differ from a provisional rating.

RATINGS RATIONALE

"The (P)B3 rating assigned to the new unsecured and unsubordinated bonds is both in line with Fage's B3 CFR, given the absence of material secured debt in the company's capital structure, other than the asset-backed USD50 million revolving credit facility for Fage USA, and with the company's existing senior unsecured debt instrument ratings," says Andreas Rands, a Moody's Vice President - Senior Analyst and lead analyst for Fage. The senior unsecured notes rank pari passu with other unsecured debt and are structurally subordinated to the liabilities of non-guaranteeing subsidiaries. However, there are only limited liabilities at non-guarantors, offering substantial protection from subordination to noteholders. As of the 12 months ended 30 September 2012, the issuers and guarantors represented approximately 99.3% of Fage's EBITDA and 96.9% of its total assets (before eliminations).

Furthermore, Moody's notes that Fage is offering the proposed bonds as additional notes to the existing USD150 million of senior unsecured notes due 2020, also issued jointly by Fage and Fage USA. The additional notes benefit from the same terms and conditions as the existing notes, except that certain clauses will be amended to (1) restrict the ability for Fage Dairy Industry S.A., ("Fage Greece"), a subsidiary of Fage, to receive credit support from Fage; and (2) exclude Fage Greece from certain material events that may cause a default or event of default under the indenture. This amendment requires the consent of the holders of the existing USD150 million of senior unsecured notes due 2020 and Moody's understands that this process is under way. However, we understand, that if the required consent level is not achieved, the company can start an alternative consent process which is open to all holders of the 2020 notes. We further understand that under the alternative consent process, holders of the proposed USD250 million of senior unsecured notes due 2020 will be deemed to have consented to the amendments by virtue of acquiring the notes without any further consent. We understand that holders of the proposed USD250 million of senior unsecured notes would constitute a majority of the 2020 notes for the proposed alternative consent process. The documentation of the USD150 million senior unsecured notes contains limitations to additional indebtedness, restricted payments and permitted liens, including an incurrence EBITDA coverage ratio test of 2.0:1.0 and a negative pledge.

Moody's expects that Fage will use the net proceeds of the new notes issuance (1) to redeem the principal amount outstanding under its EUR101.5 million of senior unsecured notes due 2015 (approximately USD136 million); (2) to repay other existing indebtedness -- specifically, amounts outstanding under the company's USD50 million revolving credit facility (approximately USD22 million) and EUR12 million of short-term lines in Greece (approximately USD15 million); and (3) to finance further US manufacturing capacity expansion and for other general corporate purposes (approximately USD77.0 million). The short-term lines in Greece will be cancelled except for a EUR5 million bilateral line of credit with Alpha Bank. Moody's will withdraw the instrument rating of the EUR101.5 million senior unsecured notes due 2015 once fully redeemed.

Moody's anticipates that Fage's adjusted debt/EBITDA ratio will deteriorate and approach 4.5x as a result of the transaction. Within 12-18 months, however, the rating agency expects this ratio to trend below 4x (current level is estimated around 3.5x for the last 12 months to 30 September 2012), as the increased debt incurred to finance US capital expenditure requirements is reduced primarily by cash flows generated from continued strong sales growth in its key US market.

Moody's last rating action on Fage was on 11 October 2012, when the rating agency assigned a B3 corporate family rating (CFR) to the new parent company of Fage, FAGE International S.A., following a multi-step corporate restructuring by Fage completed on 1 October 2012. This rating is in line with that for Fage's former parent company, Fage Dairy Industry S.A., immediately prior to the restructuring. (Please refer to Moody's comments on the risk of a redenomination of Fage's rated debt should Greece exit the euro area in the press release dated 11 October 2012.)

DRIVERS OF B3 CFR

Fage's B3 CFR reflects its small size as well as its exposure to the Greek economy, which led to the company's Greek sales declining by c. 22.0% for the nine months to 30 September 2012. More positively, the rating is supported by Fage's strong growth in international sales, primarily in the US, which is currently offsetting the revenue decline in Greece. In the financial year (FY) 2011, Fage's overall sales grew by 13.8%, reflecting growth of 41.4% in international sales and exports, despite a decline of 9.4% in Greece. Sales trends were similar for the nine months to 30 September 2012, with overall sales up by 11.7% versus the same period last year. Fage's exports and international sales rose by 38.5%, mitigating the 22.0% decline in Greek sales. Moody's expects that the key driver of international sales growth, Fage's US business, will continue to deliver solid results as volumes with national supermarkets increase. Moody's notes that the expected solid sales growth outside of Greece has been much more profitable, with Fage Greece reporting a 29.0% gross margin in FY2011, relative to 39.7% at the group level.

Moody's further notes a continued deterioration in Fage's Greek business in light of the worsening macroeconomic environment in that country. This is due to a combination of customers migrating to cheaper private-label products, resulting in loss of market share, and retailers experiencing increased liquidity constraints, causing the company to cease trading with some partners. Given the continuation of austerity measures in Greece, Moody's expects these negative performance trends to worsen during the coming quarters, thereby increasing Fage's reliance on its international sales.

OUTLOOK

The negative outlook on the ratings reflects Moody's expectation that the significantly negative operating performance trend in Fage's Greek operations will continue for around 6-12 months. However, Moody's continues to believe that Fage's US operations will offset these negative performance trends and that the company will maintain an adequate liquidity profile, which the rating agency will closely monitor. The increased likelihood of a further, disorderly, default by Greece, and possibly even of the country exiting the euro area, could exert further pressure on Fage's operating performance and debt-servicing capacity. For the outlook to be stabilised, Fage would need to maintain an adjusted gross debt/EBITDA ratio below 4.5x on a sustainable basis. In addition, Moody's would require evidence of a reduction in the risk of (1) a further deterioration in Fage's results in Greece; and (2) Greece's exit from the euro area.

WHAT COULD CHANGE THE RATING DOWN/UP

Downward pressure on Fage's ratings could develop in the event of a weakening in its competitive position in Greece or slower growth in international sales, such that the company exhibits (1) low-single-digit EBITDA margins; (2) negative free cash flow generation; (3) a debt/EBITDA ratio above 4.5x on a sustainable basis; and/or (4) tighter liquidity. Although Greece's exit from the euro area is not Moody's central scenario, should it occur, additional negative pressure could be exerted on Fage's ratings to the extent that its Greek operations and debt-servicing capacity were significantly impaired.

Although unlikely in the near term, positive pressure on the ratings would require evidence of continued growth in the company's export markets, which would offset margin pressure in Greece and lead to EBITDA margins above 10%, positive free cash flow generation and debt/EBITDA trending to below 3.5x on a sustainable basis. To consider a rating upgrade, Moody's would require evidence of a material reduction in the risk of (1) a further deterioration in Fage's results in Greece; and (2) Greece's exit from the euro area. Moody's will also consider the company's liquidity position as a key driver of a positive action.

PRINCIPAL METHODOLOGY

The principal methodology used in rating FAGE International S.A. was the Global Packaged Goods Industry rating methodology, published in July 2009. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA, published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

FAGE International S.A. ("Fage") manufactures and markets dairy products in Greece, North America, UK, Italy and Germany. While the business was founded in Greece in 1926, it has significantly diversified its revenues into other geographies (notably the US) over the past 10 years. In Greece, Fage is the market leader for branded yoghurts and in the US, the company is the fourth-largest branded yoghurt company. The Filippou family, which founded the company, still retains full control. Fage reported EUR385.2 million in revenues for the year ended December 2011.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

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Andreas Rands Vice President - Senior Analyst Corporate Finance Group Moody'sInvestors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Paloma San Valentin MD - Corporate Finance Corporate Finance Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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