MOODY'S REVIEWS FOSTER'S Baa1 SENIOR RATING FOR POSSIBLE DOWNGRADE FOLLOWING ANNOUNCEMENT OF SHARE BUY-BACK
New York, 6/5/1997 -- Moody's Investors Service is reviewing the Baa1 senior debt rating of FBG Finance Limited for possible downgrade following the announcement by its parent company, Foster's Brewing Group Limited (Foster's), of a proposal to dramatically reconfigure its capital structure by undertaking an A$625 million share buy-back. Funding for the share buy-back will have a large debt component and will increase leverage to 70%. Moody's review will focus on the level of financial risk inherent in Foster's ongoing efforts to enhance shareholder returns, the company's appetite for future acquisitions, and the stability of earnings and cash flow generated by its existing beer and wine businesses. FBG Finance's rating is based on a guarantee from Foster's.
In order to enhance shareholder returns and diversify the base of its equity ownership, Foster's will propose to its shareholders a major reconfiguration of its capital structure. The company has come to an arrangement under which its two major shareholders -- Asahi Beer International Holding (Australia) Ltd (ABIHA) and Broken Hill Proprietary Company Ltd (BHP) -- have committed to dispose of all of the shares they own in Foster's. ABIHA holds 270.3 million shares (13.8% of Foster's total) and BHP holds 716.6 million shares (36.5% of total). Under the terms of an agreement between Foster's and ABIHA, Foster's will purchase 254.5 million of the shares held by ABIHA (13.0% of total) for total consideration of A$625 million, or A$2.49 per share. BHP has entered into a separate agreement under which it will sell 616.6 million of the Foster's shares that it owns (31.4% of total) to institutional and retail investors for A$2.49 per share. BHP also intends to offer the remaining 100 million Foster's shares (5.1% of total) to BHP's shareholders.
Foster's Brewing Group Limited, headquartered in Melbourne, Australia, conducts brewing operations in Australia, Canada, and China through its subsidiaries and joint ventures. It also owns pub estates in the U.K. through a joint venture. FBG Finance Limited, a wholly-owned subsidiary of Foster's, is a financing company for Foster's and its controlled entities.
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