New York, January 20, 2016 -- Moody's Investors Service assigned a provisional rating of (P)A3 to a
$1.47 billion bond issued by Anheuser-Busch InBev
Finance Inc. ("ABI") to pre-fund the acquisition of SABMiller
PLC (A3/Prime-2 on review direction uncertain). The issuance
of the Formosa bond follows $46 billion of bonds issued by ABI
on January 13, 2016, which were also rated (P)A3. The
acquisition is expected to close later in 2016.
All other ratings of ABI, including its A2 senior unsecured and
Prime-1 short term ratings, remain on review for downgrade.
If the transaction goes through as expected, and assuming debt is
pari passu, ABI's existing senior unsecured and short-term
ratings will likely be downgraded to A3 and Prime-2, respectively.
The provisional (P)A3 rating incorporates Moody's assumption that the
transaction will close as anticipated for approximately $108 billion,
funded by a combination of debt and stock, and that the sale of
SABMiller's joint venture stake in MillerCoors will close simultaneously.
Assignments:
Issuer: Anheuser-Busch InBev Finance, Inc
Senior Unsecured Bond due 2046 at (P)A3
RATINGS RATIONALE
"The (P)A3 rating on the new bonds is one notch below the company's current
ratings which remain on review. The (P)A3 rating primarily reflects
the significant debt and resulting high leverage that ABI will incur to
fund the deal" said Linda Montag, Moody's Senior Vice President.
"We expect ABI's debt to EBITDA leverage (using Moody's standard adjustments)
to peak at over 5 times at closing of the SABMiller transaction and to
improve to closer to 4 times over a one to two year period, which
is still high for an investment grade rating" she added. Moody's
does not expect leverage to reach 3 times until sometime in 2020.
The slow reduction in financial leverage is partly a factor of a relatively
high dividend payout. This will result in retained cash flow to
net debt metrics in the high single digits range in the early years,
returning to the low- to mid- teens by 2020. These
weak leverage metrics will be offset by the combined company's vast and
diverse franchise that will include a portfolio of beer brands that have
leading market shares, including number one market positions in
most of the world's largest and most profitable beer markets. While
there are integration risks and some uncertainty about certain owned businesses
and business partners, ABI has a long track record of managing acquisitions,
which will help to mitigate these risks. Moody's expects that the
company will be able to meet or beat its synergy and cost savings targets
and that already high profitability (EBIT margins in the low-mid
30% range) will be sustained or even improved. Importantly,
ABI's senior management has articulated publicly that it will continue
to target a net debt to EBITDA leverage (by the company's definition)
of 2 times over the longer term. These positives help to support
a relatively high investment grade rating despite leverage metrics that
will be in speculative grade territory for several years.
ABI's ratings continue to reflect the company's position as the world's
largest brewer, its wide portfolio of brands at various price points,
and leading positions in some of the largest and most profitable beer
markets in the world. The ratings are further supported by the
company's strong margins, excellent liquidity and large, stable
cash flows. At the same time, in its ratings Moody's factors
in the company's exposure to somewhat volatile economies, including
parts of Latin America and Asia, in addition to declining beer consumption
in developed markets such as North America and Europe.
Combining the world's largest brewing company, ABI, with the
second largest, SABMiller, will create a beer behemoth with
revenue more than double that of the next largest competitor, Heineken
N.V. (Baa1 stable). SABMiller controls more than
200 brands in more than 80 countries. ABI has more than 200 brands
in more than 130 countries. The company's enhanced scale,
as well as its improved geographic and product diversification is an important
consideration that helps to offset the initially weaker leverage metrics.
The combined company will have approximately $61 billion in total
revenues and around $25 billion in EBITDA.
Based on its track record, Moody's believes that ABI would identify
enough synergies to improve SAB's EBITA margins (in the low 30%
range) to a level closer to its own EBITA margins (in the mid 30%
range).
Anheuser-Busch InBev SA/NV (ABI), incorporated in Leuven,
Belgium, is the world's largest brewing company. ABI has
operations in over 25 countries and sells its products in over 130 countries,
with market leading positions in North America, Brazil, Mexico
and Argentina. In Brazil, it operates through its subsidiary
Companhia de Bebidas das Americas ("AmBev") (rated Baa1, on review
for downgrade). The company reported $45 billion in revenue
for the twelve months ended September 30, 2015.
SABMiller plc ("SABMiller") is the world's second-largest brewer
by volume, behind Anheuser-Busch InBev, producing and
distributing a large variety of beer brands in approximately 75 countries.
During the twelve months ending September 2015, the company reported
revenues net of excise duty of USD15.6 billion.
The principal methodology used in this rating was Global Alcoholic Beverage
Industry published in October 2013. 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 certain 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 certain 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 certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Linda Montag
Senior Vice President
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653
Moody's Assigns (P)A3 rating to Anheuser-Busch's InBev $1.47 billion Formosa bond prefunding SABMiller acquisition
