Moody's affirms Coca-Cola Amatil's senior unsecured A3 and short-term P-2 ratings, as well as ratings of CCA's supported subsidiaries; outlook changed from stable to negative

Nevin Barich

SYDNEY , April 11, 2014 (press release) – Approximately USD 1.6 billion in debt securities affected

Moody's Investors Service has today affirmed the senior unsecured A3 and short term P-2 ratings of Coca-Cola Amatil Limited (CCA) as well as the ratings of supported subsidiaries. The outlook on the ratings has been changed to negative from stable.

The following ratings are affected:

Coca-Cola Amatil Limited: Senior unsecured A3, Senior unsecured MTN (P)A3, subordinate MTN (P)Baa1, Commercial paper P-2, Other short term (P)P-2

Coca-Cola Amatil (NZ) Ltd: Senior unsecured A3, Senior unsecured MTN (P)A3

Coca-Cola Amatil (Aust) Pty Ltd: Senior unsecured MTN (P)A3, Subordinate MTN (P)Baa1, Commercial paper P-2, Other short term (P)P-2

RATINGS RATIONALE

The change of outlook follows today's announcement that the company expects first half 2014 (six months ending 30 June 2014) Group EBIT (before significant items) to decline by around 15% over the comparable period.

"Today's announcement represents the latest development in a credit profile that has been weakening over the past three years, in large part due to the negative impact of stiffer price competition in the key carbonated beverage grocery channel as well as difficult operating conditions in Indonesia", says Maurice O'Connell, a Moody's Vice President and Senior Analyst, adding, "the negative outlook reflects a heightened degree of uncertainty regarding CCA's ability to sustain leverage metrics consistent with an A3 rating on a consistent basis"

The outlook change also considers the risk that the weakened profitability may extend beyond management's expectation, thereby leaving very limited - if any - cushion within the rating. Accordingly, financial leverage (as measured by Debt/EBITDA) will likely be close to the rating tolerance of 3.5x in FY14. Moody's considers the domestic competition to be a key challenge for CCA, amid a change in consumer behavior and pressures from retailers.

CCA's A3 rating continues to reflect its strong franchise with leading market positions in its major markets - Australia and New Zealand - supported by the strength of Coke's brands, strong customer relationships and significant distribution network. The rating also factors in the support for CCA's credit profile that comes from its participation in the global bottler network of the wider Coca-Cola group, including having The Coca-Cola Company ("TCCC", Aa3, stable) as a cornerstone shareholder. CCA's A3 senior unsecured rating benefits from a one-notch rating uplift, reflecting the implied support from 30% owner TCCC. As such the stand-alone rating, before uplift due to the ownership and implied support of TCCC is Baa1.

At 2013 year-end CCA's financial leverage (Moody's adjusted ratio) was around 3.1x Debt/EBITDA (2.8x at FYE2012) compared to a rating tolerance of 3.5x.

The outlook on the rating could return to stable if there is a sustained improvement in the operating environment in the second half, or if CCA implements countermeasures as part of a strategic review that the company announced today. We would be looking for Debt / EBITDA remaining comfortably below 3.5x on a consistent basis.

On the other hand, the rating may experience further downward pressure if CCA experiences weakness in leverage such that Debt/EBITDA exceeds 3.5x. Any significant increase in the extent of negative free cash flow could also be a sign of emerging credit weakness at the existing rating level.

The rating may also be pressured should there be a meaningful change in CCA's relationship to/with TCCC, or if TCCC's rating fall to within one notch of CCA's standalone rating.

The principal methodology used in these ratings was the Global Soft Beverage Industry published in May 2013. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

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.

Maurice O'Connell
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Pty. Ltd.
Level 10
1 O'Connell Street
Sydney NSW 2000
Australia
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100
Terry Fanous
Associate Managing Director
Corporate Finance Group
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100
Releasing Office:
Moody's Investors Service Pty. Ltd.
Level 10
1 O'Connell Street
Sydney NSW 2000
Australia
JOURNALISTS: (612) 9270-8102
SUBSCRIBERS: (612) 9270-8100

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