SOUTH AFRICA – Anheuser-Busch InBev (AB InBev), an international brewing company’s credit rating has been downgraded to the lowest tier of investment-grade following Moody’s warning that the company is struggling to pay its US$100 billion debt load.
According to Moody’s Investor Service, a US based credit firm, the brewer’s Senior Unsecured debt ratings were lowered, putting the company three levels away from junk rating.
Moody’s said that depreciating currencies in emerging-markets are to blame for the brewer’s woes as it has exhausted profits from the beer giant.
This has left the company’s debt five times earnings before interest, taxes, repayment and depreciation (EBITDA).
“Deleveraging is behind original expectations due largely to foreign currency fluctuations and under-performance of certain emerging economies,” Moody’s said.
Moody’s expects the brewer to reduce its debt load to about four times EBITDA in the next two years, otherwise it could see further downgrade.
Massive debt burden
Continued deterioration of the company’s financial position has been a major concern to credit investors.
AB InBev’s liabilities mushroomed as part of its 2016 acquisition of SABMiller.
The acquisition, valued at more than US$100 billion was seen as a major milestone for the brewer, with expected synergies in the beer market and product portfolio.
The transaction involved a staggering US$2 billion in taxes and fees to advisers to complete the deal, which was the third largest corporate takeover in the history of the sector.
Standard & Poor’s has an A- rating on AB InBev’s long term debt, which has been on review for downgrade since March 2017.
Analysts have said that if AB InBev is to revive its stock, which has fallen by a third over the past year, the master brewer must bring down its borrowings.
However, this has been perceived as a long term fix and therefore the effects of a series of credit rating cuts can persist.