New York, December 10, 2018 -- Moody's Investors Service ("Moody's") today downgraded
the senior unsecured ratings of Anheuser-Busch InBev SA/NV's (ABI)
and its affiliates to Baa1 from A3. The Prime-2 rating for
short term debt was affirmed. The rating outlook is stable.
This concludes the review for downgrade that was initiated on October
1, 2018.
RATINGS RATIONALE
The downgrade reflects Moody's expectation that ABI's leverage will
remain high for the next few years. Moody's expects free
cash flow to improve due to the company's recent 50% dividend
cut and the benefit of cost savings. However the company's
progress in reducing its high debt balance of over $100 billion
will still be slow. Deleveraging is behind original expectations
due largely to foreign currency fluctuations and underperformance of certain
emerging economies. Moody's expects that subdued GDP growth
over the next 12 to 18 months in a number of emerging markets will continue
to be a headwind. Moody's expects debt to EBITDA leverage
(including Moody's adjustments) to decline from around 5 times at
the end of 2018, to around 4 times within about two years.
Management continues to target an optimal net debt to EBITDA metric (by
its own definition) of 2 times.
The Baa1 rating reflects ABI's strong qualitative fundamentals.
These include its position as the world's largest brewer, its wide
portfolio of brands at various price points, and leading positions
in some of the world's largest and most profitable beer markets.
ABI has grown EBITDA organically for seven straight quarters despite some
volume softness in certain markets. The company raised its expectations
for savings from deal synergies to $3.2 billion and will
be on or ahead of schedule in achieving them. ABI has strong margins,
excellent liquidity, and large, stable operating cash flows.
Moody's expects EBITDA to approach $25 billion in the next
few years. The dividend reduction will allow the company to post
positive free cash flow in 2018, and more significant free cash
flow in 2019 and beyond. Moody's expects that retained cash
flow to net debt will to begin to recover from low single digits before
the dividend cut, to high single digits in the next 12-18
months. However, unpredictable movements in foreign currency
and the resulting translation impact could cause positive or negative
shifts in credit metrics going forward.
The affirmation of the Prime-2 rating reflects the company's strong
liquidity with significant cash on hand, large available credit
facilities, and minimal debt maturities in the next two years.
The stable outlook reflects Moody's expectation that ABI will be
able to make progress in reducing leverage over the next few years.
Moody's also expects the company to maintain solid operating performance
and a financial policy that seeks to restore leverage metrics to a level
more appropriate for the rating.
To achieve an upgrade, ABI would need to grow earnings and cash
flow, and sustain strong profit margins. It would also need
to reduce debt to EBITDA leverage to under 4 times and improve retained
cash flow as a percent of net debt to over 10% (including Moody's
adjustments).
The ratings could be downgraded if ABI encounters operational difficulties
or if profitability falls. Ratings could also be downgraded if
debt to EBITDA leverage is not reduced to 4.5 times or below by
the end of calendar 2020 (including Moody's adjustments).
Large shareholder returns or debt funded acquisitions before the company
has materially reduced leverage could also lead to a downgrade.
Anheuser-Busch InBev SA/NV, incorporated in Leuven,
Belgium, is the world's largest brewing company. ABI has
operations in 50 countries worldwide with market leading positions in
North America, Brazil, Mexico, South Africa, Australia
and a leadership position in premium beer in China. In Brazil,
it operates through its subsidiary Companhia de Bebidas das Americas ("AmBev")
(rated Baa3, stable). Annual revenues are approximately $56
billion.
Ratings downgraded:
..Issuer: Anheuser-Busch Companies, LLC
.... Issuer Rating, to Baa1 from A3
....Senior Unsecured Medium-Term Note
Program, to (P)Baa1 from (P)A3
....Senior Unsecured Regular Bond/Debenture,
to Baa1 from A3
..Issuer: Anheuser-Busch InBev Finance,
Inc
....Senior Unsecured Medium-Term Note
Program, to (P)Baa1 from (P)A3
....Senior Unsecured Regular Bond/Debenture,
to Baa1 from A3
....Senior Unsecured Shelf, to (P)Baa1
from (P)A3
..Issuer: Anheuser-Busch InBev SA/NV
.... Issuer Rating, to Baa1 from A3
....Senior Unsecured Medium-Term Note
Program, to (P)Baa1 from (P)A3
....Senior Unsecured Regular Bond/Debenture,
to Baa1 from A3
..Issuer: Anheuser-Busch InBev Worldwide Inc
....Senior Unsecured Regular Bond/Debenture,
to Baa1 from A3
....Senior Unsecured Shelf, to (P)Baa1
from (P)A3
..Issuer: FBG Finance Pty Ltd
....Senior Unsecured Medium-Term Note
Program, to (P)Baa1 from (P)A3
....Senior Unsecured Regular Bond/Debenture,
to Baa1 from A3
..Issuer: CALIFORNIA ENTERPRISE DEVELOPMENT AUTHORITY
....Senior Unsecured Revenue Bonds,
to Baa1 from A3
..Issuer: California Statewide Communities Dev.
Auth.
....Senior Unsecured Revenue Bonds,
to Baa1 from A3
..Issuer: Cartersville (City of) GA, Development
Auth.
....Senior Unsecured Revenue Bonds,
to Baa1 from A3
..Issuer: Fort Collins (City of) CO
....Senior Unsecured Revenue Bonds,
to Baa1 from A3
..Issuer: Gulf Coast Waste Disposal Authority,
TX
....Senior Unsecured Revenue Bonds,
to Baa1 from A3
..Issuer: Jacksonville (City of) FL
....Senior Unsecured Revenue Bonds,
to Baa1 from A3
..Issuer: Jacksonville Economic Development Comm.,
FL
....Senior Unsecured Revenue Bonds,
to Baa1 from A3
..Issuer: James City County Economic Dev. Auth.,
VA
....Senior Unsecured Revenue Bonds,
to Baa1 from A3
..Issuer: New Hampshire St. Business Finance
Authority
....Senior Unsecured Revenue Bonds,
to Baa1 from A3
..Issuer: New Jersey Economic Development Authority
....Senior Unsecured Revenue Bonds,
to Baa1 from A3
..Issuer: OHIO (STATE OF)
....Senior Unsecured Revenue Bonds,
to Baa1 from A3
..Issuer: Ohio Water Development Authority
....Senior Unsecured Revenue Bonds,
to Baa1 from A3
..Issuer: Onondaga County Industrial Dev. Agy.,
NY
....Senior Unsecured Revenue Bonds,
to Baa1 from A3
..Issuer: St. Louis Industrial Development
Auth., MO
....Senior Unsecured Revenue Bonds,
to Baa1 from A3
Affirmations:
..Issuer: Anheuser-Busch InBev SA/NV
....Senior Unsecured Medium-Term Note
Program, Affirmed (P)P-2
..Issuer: Anheuser-Busch InBev Worldwide Inc
....Senior Unsecured Commercial Paper,
Affirmed P-2
Outlook Actions:
..Issuer: Anheuser-Busch Companies, LLC
....Outlook, Changed To Stable from
Rating Under Review.
Issuer: Anheuser-Busch InBev Finance, Inc
....Outlook, Changed To Stable from
Rating Under Review
..Issuer: Anheuser-Busch InBev SA/NV
....Outlook, Changed To Stable from
Rating Under Review
..Issuer: Anheuser-Busch InBev Worldwide Inc
....Outlook, Changed To Stable from
Rating Under Review.
.Issuer: FBG Finance Pty Ltd
....Outlook, Changed To Stable from
Rating Under Review
The principal methodology used in these ratings was Global Alcoholic Beverage
Industry published in March 2017. Please see the Rating Methodologies
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 credit rating action on the support provider and in relation to
each particular credit 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 credit rating action,
and whose ratings may change as a result of this credit 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: 1 212 553 0376
Client Service: 1 212 553 1653
Peter H. Abdill, CFA
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653
