Paris, June 15, 2012 -- Moody's Investors Service has today downgraded to Baa1 from A3 and
to (P)Baa1 from (P)A3 the backed senior unsecured and medium-term
note (MTN) ratings of Coca-Cola HBC Finance B.V and Coca-Cola
HBC Finance plc, wholly-owned guaranteed subsidiaries of
Coca-Cola Hellenic Bottling Company S.A. Coca-Cola
Hellenic's commercial paper programme rating is unchanged at Prime-2.
The outlook on the ratings remains negative.
RATINGS RATIONALE
"Today's rating action is prompted by the weakened credit
profile of Coca-Cola Hellenic and our expectations that the current
macroeconomic and consumer outlook across Europe will remain depressed
in the coming quarters," says Yasmina Serghini-Douvin,
a Moody's Vice President -- Senior Analyst and lead
analyst for Coca-Cola Hellenic. Declining sales across many
of the company's European markets have translated into weaker profitability
and credit metrics which fell below Moody's expectations for the
preceding rating category and positioned the company more weakly versus
its peers: in the 12 months to 31 March 2012, Moody's
estimates that Coca-Cola Hellenic's adjusted EBITA margin
was approximately 7.3% (it was 10.6% in 2010),
its debt/EBITDA ratio was 3.2x and its retained cash flow (RCF)/net
debt ratio was 27.6%.
Moreover, Moody's is concerned about the potential repercussions
from the ongoing turmoil in Greece, where Coca-Cola Hellenic
is domiciled, specifically the increased probability of a scenario
where Greece could exit the euro and the impact it could have on the company's
credit quality. Overall, the company has a higher exposure
to Southern Europe than other rated beverage companies, which makes
it more vulnerable to these weakened economies and is likely to impede
margin progression. This is mitigated by the fact that, in
2011, Greece represented only a small proportion of Coca-Cola
Hellenic's net sales -- approximately 8% --
after depressed private consumption took its toll on the company's
volumes in the country (down 22% since 2009).
More positively, Coca-Cola Hellenic has proved that it can
continue to generate a solid free cash flow despite its sales being pressured
across several of its European markets. Moody's considers
that the company's commitment to its three-year (to 2014)
free cash flow target of EUR1.45 billion and to building a cash
cushion in 2012 are appropriate measures to preserve its financial flexibility
in the current volatile capital markets environment, and are supportive
of the company's rating.
The Baa1 rating is further supported by (i) the company's strategic
importance to The Coca Cola Company ("TCCC"), one of
its two principal shareholders; (ii) its solid portfolio of soft
drinks and market positions; and (iii) the absence of any near-term
debt repayments, with the company's next significant bond
(USD500 million) coming due in September 2013. Moody's expects
Coca-Cola Hellenic to execute the refinancing of its debt instruments
coming due in the next 18 months well ahead of maturity.
The business arrangements between Coca-Cola Hellenic and TCCC do
not include a guarantee of the former's financial obligations.
However, Moody's believes that the close and long-standing
relationship between the two entities is such that, if need be,
TCCC will provide necessary support to maintain Coca-Cola Hellenic's
adequate liquidity profile.
The negative outlook reflects Moody's concerns that the ongoing
political and economic challenges in Europe create an unfavourable trading
environment for Coca-Cola Hellenic. It also captures the
risk that a further deterioration of the situation in Greece could disrupt
the company's operations there. This will likely impede the
improvement in Coca-Cola Hellenic's operating margins and
credit metrics.
WHAT COULD CHANGE THE RATING UP/DOWN
A rating upgrade is unlikely in the near term considering the uncertain
political and macroeconomic situation in Europe. However,
the outlook could change to stable if Coca-Cola Hellenic demonstrates
a resilience in operating performance going forward and there is evidence
that the company's performance and finances remain largely unaffected
by it being domiciled in Greece. An upgrade would, in addition
to the previous elements, require credit metrics to improve sustainably
i.e. RCF to net debt in the high 20s and a debt/EBITDA ratio
around 2.5x.
The rating could come under downward pressure if there is (i) a major
adverse change to the operating environment in Greece, notably as
a result of the government's programme to stabilise public finances or
if Greece exits the euro, (ii) a downgrade of TCCC's long-term
rating (currently Aa3, stable outlook) or a change in the existing
relationship and/or agreements with TCCC, (iii) a deterioration
in the company's overall liquidity profile including tighter access
to debt capital markets or lower standard of liquidity management.
Other factors which could weigh on the rating include the following:
(i) failure to maintain a retained cash flow/net debt ratio at least in
the mid-twenties in percentage terms and a debt/EBITDA ratio of
around 3.0x, (ii) market share erosion in Coca-Cola
Hellenic's key established markets or (iii) significant debt-financed
acquisition(s).
The principal methodology used in rating Coca-Cola HBC Finance
B.V and Coca-Cola HBC Finance plc was the Global Soft Beverage
Industry Methodology published in December 2009. Please see the
Credit Policy page on www.moodys.com for a copy of this
methodology.
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.
The ratings have been disclosed to the rated entities or their designated
agent(s) and issued with no amendment resulting from that disclosure..
Information sources used to prepare each of the ratings are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's considers the quality of information available on the rated
entities, obligations or credits satisfactory for the purposes of
issuing these ratings.
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uses in assigning the ratings is of sufficient quality and from sources
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independent third-party sources. However, Moody's
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the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Yasmina Serghini-Douvin
Vice President - Senior Analyst
Corporate Finance Group
Moody's France SAS
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Eric de Bodard
MD - Corporate Finance
Corporate Finance Group
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Moody's downgrades Coca-Cola Hellenic to Baa1; outlook negative
