21st Apr 2021 22:01
(Alliance News) - Moody's Investors Service on Monday downgraded Coca-Cola European Partners PLC's long-term issuer rating and the senior unsecured debt instrument ratings to Baa1 from A3.
The credit ratings agency also affirmed the Prime-2 short-term rating of the largest independent bottler by revenue in the Coca-Cola Co system.
The outlook has been changed to stable from ratings under review.
Moody's said the downgrade follows the acquisition of Sydney-based bottling peer Coca-Cola Amatil Ltd.
CCEP is paying AUD13.50, about GBP7.59, per share in cash for the 69% of Amatil owned by independent shareholders. CCEP will then buy the remaining 31% held by US brand owner Coca-Cola Co for a lower price. The deal valued Amatil at AUD9.77 billion, about GBP5.40 billion.
Ernesto Bisagno, Moody's vice president and lead analyst for CCEP, added: "The downgrade to Baa1 from A3 reflects the significant debt that CCEP will incur in to fund the acquisition of CCA, which will result in a material increase in leverage and a deterioration in credit metrics.
"While the rating is initially weakly positioned in the Baa1 category, the stable outlook reflects our expectation that CCEP will de-lever towards 4.0x by 2023 from 5.6x in 2021."
Moody's said it has factored into its decision to downgrade the ratings the governance considerations associated with the company's financial strategy and risk management.
"The deterioration in CCEP's financial profile reflects a more aggressive financial policy which indicates a higher leverage tolerance," Moody's said.
It added: "This is partially offset by the company's public commitment to deleverage towards 2.5x to 3.0x."
CCEP operates in the UK, France, Germany, Spain and Portugal, the Benelux region, and Sweden and Norway, while Amatil operates in Australia, New Zealand, Indonesia, Papua New Guinea and Fiji.
"While the acquisition of CCA will weaken CCEP's financial profile, Moody's said, it will almost double its consumer reach creating a broader footprint with exposure to the mature markets of Australia and New Zealand, growth markets such as Indonesia and the potential to expand into new geographies in Asia," Moody's added.
Moody's also assigned a Baa1 senior unsecured rating to Coca-Cola European Partners proposed note offering - which will be used to pay for the Coca-Cola Amatil deal, alongside existing resources.
By Paul McGowan; [email protected]
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