Fitch Downgrades Anheuser-Busch's IDR to 'A'; Outlook Stable.NEW YORK New York, state, United States New York, Middle Atlantic state of the United States. It is bordered by Vermont, Massachusetts, Connecticut, and the Atlantic Ocean (E), New Jersey and Pennsylvania (S), Lakes Erie and Ontario and the Canadian province of -- Fitch Ratings Fitch Ratings An international rating agency for financial institutions, insurance companies, and corporate, sovereign, and municipal debt. Fitch Ratings has headquarters in New York and London and is wholly owned by FIMALAC of Paris. has downgraded Anheuser-Busch Companies, Inc. (BUD) as follows: --Issuer Default Rating (IDR IDR In currencies, this is the abbreviation for the Indonesian Rupiah. Notes: The currency market, also known as the Foreign Exchange market, is the largest financial market in the world, with a daily average volume of over US $1 trillion. ) to 'A' from 'A+'; --Bank credit facilities credit facilities npl → facilidades fpl de crédito credit facilities npl → facilités fpl de paiement credit facilities to 'A' from 'A+'; --Senior unsecured notes to 'A' from 'A+'. Fitch also affirms BUD's commercial paper rating at 'F1'. The Rating Outlook is Stable. Approximately $7.4 billion of debt is affected by these rating actions. BUD announced yesterday that it intends to increase leverage and reduce its cash flow to total debt (CFFO/total debt) target from the previous 30-to-40% range to the 25-to-30% range. Its first priority is to invest in its businesses and secondarily, to return cash to shareholders through increased dividends and share repurchases Share Repurchase A program by which a company buys back its own shares from the marketplace, reducing the number of outstanding shares. This is usually an indication that the company's management thinks the shares are undervalued. . This is noteworthy in light of the fact that in May 2006 the company decided to improve its CFFO/ total debt to the upper end of 30-40% target to maintain its 'A+' rating. Driving leverage to between 25-30% (CFFO/total debt) from the latest twelve-month level of 35.5% is very aggressive. This strategy, combined with the new leverage target, is no longer consistent with an 'A+' rating. In conjunction with the more aggressive leverage target, the Board of Directors approved a new 100 million share repurchase program. The program follows a similar 100 million share program authorized in March 2003. Approximately 15 million shares remain open under the 2003 program (bringing total open authorized repurchases to approximately 115 million shares). The company expects to repurchase about $2.5 billion of stock during 2007, subject to the level of business investment. Fitch's downgrade Downgrade A negative change in the rating of a security. Notes: For example, an analyst may downgrade a stock from strong buy to buy, or a bond rating agency may downgrade a bond from AAA to AA. reflects BUD's increased tolerance for debt driven largely by shareholder friendly activities that limits the cushion of cash flow available to bondholders. With the planned repurchase of $2.5 billion of stock in 2007, Fitch is projecting significant borrowing to occur despite strong cash flow. This will result in higher leverage and weaker credit protection measures. The pace of share repurchases will be watched closely as will dividend increases. A steady share repurchase program consisting of open market purchases throughout the year is anticipated. Also, any debt financed acquisitions/investments are expected to result in reduced share repurchases so the new leverage target is maintained. Deviations from these expectations could have rating implications as would additional financial engineering benefiting stockholders to detriment of bondholders. Fitch's rating definitions and the terms of use Terms of Use are rules set up by the owner of an intellectual property or service to govern how they may be legally used. In many cases, terms of service are used as a contractual agreement between a company and users of a service they provide. of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures Policies and Procedures are a set of documents that describe an organization's policies for operation and the procedures necessary to fulfill the policies. They are often initiated because of some external requirement, such as environmental compliance or other governmental are also available from the 'Code of Conduct' section of this site. |
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