Moody's upgrades Coca-Cola FEMSA's senior unsecured rating to A2 from A3, with stable outlook, citing belief that company will further strengthen its market position in Mexico after Grupo Tampico merger
August 31, 2011
– Moody's de México, S.A. de C.V. (Moody's) has upgraded to A2 from A3 the senior unsecured rating of Coca-Cola FEMSA, S.A.B. de C.V. (KOF). At the same time, Moody's affirmed KOF's Aaa.mx national scale rating. The rating outlook is stable.
The following debt instruments were affected:
-- USD500 million 4.625% global bonds due 2020 rating upgraded to A2 from A3.
-- MXN2,500 million 8.270% Certificados Bursátiles due 2021 rating upgraded to A2 from A3. Aaa.mx national scale rating is affirmed.
-- MXN2,500 million FLT Certificados Bursátiles due 2016 rating upgraded to A2 from A3. Aaa.mx national scale rating is affirmed.
-- MXN3,000 million FLT Certificados Bursátiles due 2012 rating upgraded to A2 from A3. Aaa.mx national scale rating is affirmed.
Please see ratings tab on the issuer/entity page on moodys.com for information on Global Scale Rating.
The upgrade of the ratings reflect our expectation that KOF will further strengthen its market position in Mexico after the merger with Grupo Tampico's beverage division, the likelihood that any future mergers or acquisitions will not be conducted at the detriment of KOF's strong financial profile, and the fact that the company has been able to maintain its strong credit metrics and healthy liquidity over the last 18 months (since we changed the outlook to positive).
"The A2/Aaa.mx ratings of Coca-Cola FEMSA are supported by the company's position as the largest Coca-Cola bottler in Latin America, with leading market share and significant distribution infrastructure in its franchise territories, strong profitability, sustained strong free cash flow generation, and healthy historical credit metrics." said Alonso Sánchez Rosario, a Moody's Assistant Vice President. While there exists some event risk likelihood as the company continues to consolidate its regional market presence, the ratings consider that the company will maintain its cash flow generation, strong liquidity and conservative leverage.
"The ratings also reflect Coca-Cola FEMSA's strategic importance to the overall Coca-Cola system, which under Moody's Global Soft Beverage Industry Rating Methodology provides a notch of ratings uplift to the company's standalone credit profile." added Alonso Sánchez Rosario.
Key credit challenges include the potential volatility and country risks inherent in some of KOF's South American markets (such as Venezuela), intense competition across franchise territories, and certain currency and commodity exposures in its cost structure.
The principal methodology used in rating Coca-Cola FEMSA was the Global Soft Beverage Industry Methodology published in December 2009. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.
Moody's National Scale Ratings (NSRs) are intended as relative measures of creditworthiness among debt issues and issuers within a country, enabling market participants to better differentiate relative risks. NSRs differ from Moody's global scale ratings in that they are not globally comparable with the full universe of Moody's rated entities, but only with NSRs for other rated debt issues and issuers within the same country. NSRs are designated by a ".nn" country modifier signifying the relevant country, as in ".mx" for Mexico. For further information on Moody's approach to national scale ratings, please refer to Moody's Rating Implementation Guidance published in August 2010 entitled "Mapping Moody's National Scale Ratings to Global Scale Ratings."
Headquartered in Mexico City, Mexico, Coca-Cola FEMSA is the largest Coca-Cola bottler globally in terms of sales volume. The company's largest and most profitable market is Mexico, which accounts for about 37% of revenues and 40% of EBITDA. It also operates in Brazil, its second-largest market, and Argentina, as well as Venezuela, Colombia and various Central American countries.
The last rating action on Coca-Cola FEMSA was on January 21, 2010, when Moody's changed the company's rating outlook to positive from stable.
For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant 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 relevant 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.
Information sources used to prepare the rating are the following: parties involved in the ratings, parties not involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.
Moody's considers the quality of information available on the rated entity, obligation or credit satisfactory for the purposes of issuing a rating.
Moody's adopts all necessary measures so that the information it uses in assigning a rating is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.
Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history.
The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.
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.