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01 May 2001
MOODY'S CONFIRMS RATINGS OF COCA-COLA ENTERPRISES (A2/P-1) AND THE COCA-COLA COMPANY (Aa3/P-1); RATING OUTLOOK IS STABLE
Approximately $23 Billion of Debt Securities Affected.
New York, May 01, 2001 -- Moody's Investors Service confirmed the A2/ Prime-1 ratings of
Coca-Cola Enterprises (CCE) and the Aa3/ Prime-1 ratings
of The Coca-Cola Company (KO) after the announcement that CCE will
acquire Hondo Incorporated and Herbco Enterprises Inc., which
are collectively known as Herb Coca-Cola and are the third largest
U.S. Coca-Cola bottler. The total transaction
value of $1.4 billion will be financed with equity (30%)
and debt (70%). The ratings confirmation is based on the
strategic logic of the acquisition, which will continue the ongoing
consolidation within the Coca-Cola system, increase CCE's
share of North American distribution of Coca-Cola products to approximately
80%, and reinforce CCE's position as the most important bottler
in the Coca-Cola system. Although the additional debt will
modestly weaken the coverage ratios at CCE and for the consolidated Coca-Cola
system at a time when the system faces considerable challenges,
Moody's expects that the Coca-Cola system will maintain an extraordinarily
powerful brand franchise, increasingly efficient marketing and distribution
capabilities, and strong cash generation. Therefore,
the rating outlook is stable.
The following ratings were confirmed:
Coca Cola Enterpises, Inc.
Senior Unsecured Debt at A2
Rating of the company for short-term obligations at Prime-1
The Coca- Cola Company
Senior Unsecured Debt at Aa3
Rating of the company for short-term obligations at Prime-1
CCE is KO's largest and most important anchor bottler. With the
Herb Cola acquisition, CCE will account for 80% of KO's North
American bottle and can shipments and more than 25% of global shipments.
The large and growing importance of CCE to the Coca-Cola system
is an important ratings factor, and helps to offset the rating pressure
that could result from CCE's weak credit protection measures. CCE
continues to be one of the principal vehicles through which KO pursues
its longer-term growth strategy. As part of this strategy,
KO promotes the continued consolidation of its global bottling system
within the hands of CCE and its 9 other anchor bottlers. CCE has
demonstrated considerable ability to effectively integrate acquired businesses
and significantly improve their operating efficiencies. A critical
factor in the successful consolidation of the Coca-Cola bottling
system has been the expansion and strengthening of the strategic alignment
between KO and its anchor bottlers. We believe that CCE is at the
forefront of all Coca-Cola bottlers in maximizing alignment with
At the same time, the system consolidation has added significant
leverage at CCE and within the Coca-Cola system overall,
resulting in a weakening of coverage ratios within the system.
This transaction will add nearly $1 billion of new debt,
and set CCE back by about a year in its plans to improve credit ratios.
The reduction in financial flexibility occurs at a time when growth has
been depressed, and pricing gains have become more difficult to
achieve. Moody's noted that there is little scope within the stable
rating outlook for further deterioration in operating fundamentals,
especially in free cash flow.
Despite current weakness in some of KO's international markets,
we believe that the company's core strengths are undiminished and will
support strong cash generation through the long term. These strengths
include one of the world's premier consumer brands, broad geographic
diversity, leading share positions in most markets, and an
increasingly efficient global bottling system.
Coca-Cola Enterprises Inc., headquartered in Atlanta,
is the world's largest bottler of Coca-Cola brand beverages.
Coca-Cola Company, headquartered in Atlanta is the world's
leading carbonated soft drink company.
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
Senior Vice President
Moody's Investors Service
JOURNALISTS: (212) 553-0376
SUBSCRIBERS: (212) 553-1653
No Related Data.
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