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Rating Action:

Moody's changes outlook on Anheuser-Busch InBev's Baa2 rating to positive

09 Mar 2010

Paris, March 09, 2010 -- Moody's Investors Service today changed the outlook on the Baa2 issuer and senior unsecured ratings of Anheuser-Busch InBev ("ABI") to positive from stable.

"The outlook change reflects the solid execution of the company's ongoing de-leveraging plan following its 2008 combination with Anheuser-Busch Companies Inc. ("BUD"), its resilient operational performance and improved liquidity profile," says Yasmina Serghini-Douvin, a Moody's Assistant Vice President--Analyst and lead analyst for ABI. The rating action also acknowledges that the progress made in 2009 in strengthening company's credit metrics could - if sustained over the next 12 to 24 months -- more firmly position ABI in its trajectory towards a higher rating category.

ABI delivered a resilient performance in 2009 in the face of a challenging consumer environment in all its markets that was characterised, in particular, by a contraction in alcoholic beverage volumes and down-trading to cheaper brands and/or distribution channels. The company's operating margins widened, helped by a modest increase in organic revenue, tight cost control, more favourable raw material costs and the USD1.1 billion in synergies extracted during 2009. The reported EBITDA margin (before non-recurring items) was 33.4%, up 179 bps from 2008, on an organic basis.

Moody's also views favourably management's continued efforts to reduce ABI's on-balance-sheet debt and the quality of the execution of its strategy since the combination with BUD was completed in November 2008, despite a depressed economic background and volatile capital market conditions. Since the completion of the transaction, ABI has integrated the purchased assets and successfully achieved the key milestones underpinning the Baa2 rating, namely a USD9.8 billion rights issue executed in December 2008, over USD7 billion in cash proceeds from the divestitures of non-strategic assets from both former InBev and BUD and the refinancing of all of the bank senior credit facilities contracted for the financing of the transaction.

In addition to these initiatives and the company's solid cash flow generation capabilities, 2009 saw a more moderate level of investments and a higher working capital inflow supported by an improvement in the US. Moody's estimates that un-adjusted free cash flow was around USD6.1 billion in 2009, contributing to a reduction in reported net debt to USD45.2 billion. For the longer term, management reiterated its objective of a ratio of net debt to EBITDA (as defined by the company) of below 2.0x, from 3.7x at year-end 2009.

The Baa2 ratings reflect the company's scale as the world's largest brewer, its large portfolio of beer brands at various price points, dominant market positions in some of the largest beer profit pools and seasoned management with a solid track record of integrating acquisitions. The ratings are further supported by the company's efficient operations and high, recurring cash flows generated by its operations.

ABI's financial profile following the combination with BUD constrains the rating as credit metrics at the end of 2009 still position the company below its rating category, although Moody's is confident that ABI will continue its de-leveraging efforts and build a stronger financial profile in 2010, when the company's metrics are expected to improve closer to the rating agency's targets. Moody's also cautions that the company is currently involved in arbitration proceedings with Grupo Modelo in connection to the transaction with BUD, the outcome of which is yet unknown, and as such it is difficult to factor this into the present rating assessment.

Moody's notes that ABI's liquidity profile has been significantly enhanced by the active refinancing activity undertaken since 2009, with in excess of USD20 billion of debt capital markets issuances. Importantly, the company announced on 26 February 2010 that it had contracted un-covenanted long-term bank financing of USD17.2 billion to be used to pay down the outstanding loans under the acquisition package; as a result, the company now has limited debt maturities in the next two years and a longer average debt duration.

The positive outlook assumes that ABI will continue its de-leveraging process and will achieve credit metrics in the next 12 months that will position it strongly in its rating category and affirm the trajectory towards a stronger financial profile. A rating upgrade will likely occur if the company improves its credit metrics such that its ratio of Retained Cash Flow to Net Debt trends towards the low twenties, Debt to EBITDA falls below 2.7x and EBIT to Interest Expense increases above 5.0x.

Moody's last rating action on Anheuser-Busch InBev was on 29 September 2008 when the rating agency first assigned a Baa2 rating to the former InBev.

The principal methodology used in rating Anheuser-Busch InBev was "Global Alcoholic Beverage Rating Methodology", 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 the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

Headquartered in Leuven, Belgium, Anheuser-Busch InBev is the largest beer company worldwide with USD36.7 billion in revenue in 2009.

Paris
Yasmina Serghini-Douvin
Asst Vice President - Analyst
Corporate Finance Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Paris
Eric de Bodard
Managing Director
Corporate Finance Group
Moody's France S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's changes outlook on Anheuser-Busch InBev's Baa2 rating to positive
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