Moody’s puts SABMiller bonds on review for downgrade
Business Day Live - Jun 8th 2016, 11:35
Moody’s, the credit rating agency, warned on Tuesday night they may downgrade SABMILLER’s bonds.
The brewer’s long-term unsecured notes, which are rated A3, were placed on "review for downgrade from direction uncertain".
Moody’s said this followed May’s downgrade of Anheuser-Busch InBev, which is acquiring SABMiller.
"Putting SABMiller on review for downgrade reflects the remaining uncertainties about Anheuser-Busch InBev’s stated intention to guarantee SABMiller’s debt," Moody’s vice-president Paolo Leschiutta said in the announcement.
"Following the acquisition by Anheuser-Busch InBev, there is still a question mark over SABMiller's future business and financial profile, in the event that its debt is not guaranteed."
In the event that the deal fails to get competition authority approval, SABMiller's ratings were likely to be confirmed at the current level, Moody’s said.
Following the acquisition, Anheuser-Busch InBev intends to sell some of SABMiller’s core assets, including its European, Chinese and US operations.
Because of these disposals, SABMiller's reported earnings before interest, tax, depreciation and amortisation (ebitda), including its associates, could be reduced by about 30%, while about 85% of its remaining ebitda will be generated in emerging markets, where financial results might be more volatile.
"Moody's understands that part of the proceeds from asset disposals will be upstreamed to Anheuser-Busch InBev to repay acquisition debt, but it is not yet certain how much debt will remain at SABMiller's level.
"With a smaller and less stable earnings base, and uncertainty as to the ongoing debt burden at SABMiller’s level, it is not yet clear if SABMiller's business and financial profile will continue to support the current A3 long-term rating on a standalone basis. Consequently, in the absence of a guarantee, the rating could be downgraded in the event of a lower creditworthiness," Moody’s said.From Business Day Live
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