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Rating Action:

Moody's affirms Coke's Aa3 ratings and stable outlook, places CCE debt on review up

25 Feb 2010

Approximately $20 billion in debt and rated credit facilities affected

New York, February 25, 2010 -- Moody's Investors Service today affirmed the Aa3 long-term and Prime-1 short term ratings of The Coca-Cola Company (KO) after the announcement that it will acquire Coca-Cola Enterprises' (CCE's) North American bottling business. The rating outlook is stable. At the same time, Moody's placed the ratings for CCE's short and long term debt on review for possible upgrade.

"The affirmation of KO's ratings is based on the view that the transaction as contemplated will not materially change the financial metrics of the consolidated system" said Linda Montag, SVP at Moody's. Moody's has always looked at the system on a combined basis for the purposes of rating KO. The shifting of the North American and European assets and of CCE's debt does not fundamentally change our view of the system. While the payment of the $10 per share dividend to CCE's non-KO shareholders will result in incremental new system debt of approximately $3.4 billion, the additional debt follows a year in which the system as a whole had strong cash flow performance and de-levered, such that there is sufficient cushion to absorb the additional debt at the current rating levels. KO will be exchanging its 35% equity interest in CCE, the Nordic Bottlers and will assume CCE's $8.8 billion in debt to acquire the North American Bottling assets. Strategically, the consolidation of the North American business will allow KO to more effectively meet the needs of changing dynamics both of its products it retailers , by allowing it to develop delivery platforms across the business that suit customer needs. In addition, the new structure is expected to allow for the realization of approximately $350 million in additional synergies.

The review for upgrade of the A3 debt ratings at CCE will focus on the assumption of the debt by KO and the likely credit support that KO will provide for the debt. To achieve the same rating as KO's existing debt, the CCE debt would need to be legally assumed or guaranteed by KO. Absent such explicit legal support we would require sufficient financial information to enable separate analysis of the CCE debt in order to maintain ratings.

While the assumption of over $8 billion of debt at a subsidiary will create significant structural subordination for KO initially, it is our expectation that KO would repay this legacy CCE debt over time, rapidly reducing structural subordination over a period of just a few years. In addition, we expect that a substantial portion (over 80%) of KO's consolidated cash flows will be generated at the parent concentrate company reducing the risks associated with debt at subsidiaries. Hence we would not notch KO's ratings despite the substantial proportion of debt at subsidiaries at closing.

The Coca-Cola Company's Aa3 rating and stable outlook reflect the system's leading position in the global carbonated soft drink ("CSD") industry, including its ownership of one of the most valuable consumer brands in the world, a highly-diverse global operation network, a growing non-carbonated portfolio and unrivaled distribution offset by higher leverage after a number of acquisitions and the likely impact of a weak global economy on restoring earlier metrics. Moody's believes that the company is having some success in its efforts to reinvigorate growth and to improve the financial performance of its bottlers, although growth has been more difficult to achieve in the current recessionary environment. In the face of stiff competition, growing consumer health awareness in North America and the difficult economy, the company is focusing on growing its non-CSD product portfolio through innovation and through acquisitions as demonstrated by its 2007 purchase of Fuze, maker of enhanced juices, teas, waters and energy drinks as well as Glaceau, maker of vitamin water, while at the same time sparking renewed interest and innovation in its core CSD product offerings. These positives are partially offset by lower expected free cash flows due to investments to turn around the acquired bottlers, difficult economic conditions globally and especially in developed economies of North America and Europe where volumes are under pressure, and slower growth in certain emerging economies.

The last rating action for The Coca-Cola Company took place on June 8, 2009 when we changed the rating outlook to stable from negative.

The last rating action for Coca-Cola Enterprises took place on August 4, 2009 when we assigned an A3 rating to the company's $250 million bond issuance.

The principal methodology used in rating these issuers was the Global Soft Beverage Industry Rating Methodology published December, 2009 which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other Methodologies and factors that may have been considered in rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

The Coca-Cola Company ("Coca-Cola", or "KO"), headquartered in Atlanta, Georgia, is the world's largest manufacturer, marketer and distributor of nonalcoholic beverage concentrates and syrups. Coca-Cola Enterprises is the Coca-Cola system's largest bottler.

New York
John Diaz
Managing Director
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Linda Montag
Senior Vice President
Corporate Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's affirms Coke's Aa3 ratings and stable outlook, places CCE debt on review up
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