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Rating Action:

Moody's places ABI's A3/ Prime-2 ratings on review for upgrade

20 Jan 2014

New York, January 20, 2014 -- Moody's Investors Service placed the long and short-term ratings of Anheuser-Busch InBev SA/NV (ABI) and guaranteed subsidiaries (A3/ Prime-2) on review for possible upgrade, six months into the integration of Mexican brewer Grupo Modelo, S.A.B. de C.V. (Modelo) and following today's announcement that it has reached agreement to purchase Oriental Brewing in South Korea for approximately $5.8 billion. The actual purchase price will be reduced by cash at Oriental Brewing and an approximate $320 million earn-out payable to ABI resulting from the original 2009 sale of Oriental Brewing to KKR. ABI has more than enough liquidity to fund the transaction considering that it had nearly $7 billion in cash and short term investments as of June, 2013 and around $4.5 billion available under its $8 billion in credit facilities, not counting the additional cash flow since June.

RATINGS RATIONALE

The review will consider the effect on ABI's leverage and other financial metrics of adding the Korean business back into its portfolio less than one year after purchasing Modelo in Mexico, and the potential for integration risks. "The Oriental Brewing acquisition will slow ABI's deleveraging timeline somewhat" said Linda Montag, Moody's Senior Vice President, " although the purchase multiple at around ten times appears reasonable relative to the growth opportunity in South Korea, and the leverage increase is modest compared to that following the $20 billion Modelo acquisition," she added. Moody's review will consider the trajectory for leverage reduction going forward. Debt to EBITDA was 3.5 times as of June, 2013 per Moody's Financial Metrics, but Moody's expects improvement will have occurred at year end 2013, although leverage will increase following the Korean acquisition.

The review will also consider the progress of the Modelo integration so far, the outlook for performance of ABI's existing businesses and the likelihood that management will remain committed to reducing leverage while growing the scale and profitability of the global ABI business.

ABI sold Oriental Brewing to KKR and Affinity Equity Partners in 2009 as part of its plan to de-lever following InBev NV/SA's acquisition of Anheuser-Busch in the US. The agreement to reacquire the business comes ahead of a call option that would have become exercisable in July 2014. Since 2009, Oriental Brewing has grown to become the largest brewer in South Korea, led by its Cass brand, which is now the leading brand in the country. The company also sells other popular brands in the market, and imports ABI brands including Budweiser, Corona and Hoegaarden. According to ABI, the South Korean beer market is expected to grow by more than 13% over the next 10 years, and Oriental Brewing has gained market share in recent years.

Moody's has said previously that an upgrade to A2/Prime-1 would require sustained good business momentum, solid liquidity, the continuation of a conservative financial policy and improvement in credit metrics with retained cash flow/net debt ratio in the mid 20% range and debt to EBITDA approaching 2.5 times (calculated using Moody's accounting adjustments). It would also require evidence suggesting successful integration of Modelo.

The principal methodology used in this rating was Global Alcoholic Beverage Rating Methodology published in October 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Anheuser-Busch InBev SA/NV, incorporated in Leuven, Belgium, is the world's largest brewing company created from the 2008 combination of InBev NV/SA with Anheuser-Busch Companies Inc. ABI has operations in over 23 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"). In June 2013, ABI completed the acquisition of the remaining stake in Mexican beer producer Grupo Modelo, S.A.B. de C.V. ("Modelo") that it did not already own in a transaction valued at $20.2 billion and spun off Modelo's U.S. beer business for $4.75 billion to Constellation brands. The company reported over $40 billion in LTM sales as of June 2013.

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 J 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 places ABI's A3/ Prime-2 ratings on review for upgrade
No Related Data.
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