S&P downgrades Coca-Cola

S&P said it lowered its ratings on Coca-Cola Co., including the corporate credit rating by one-notch to A+ from AA- and the short-term and commercial paper ratings to A-1 from A-1+.

The outlook is stable.

The agency said the downgrade reflects expectations for leverage to remain higher than previously expected now that the company has formalized a debt-to-EBITDA target in the 2x to 2.5x range.

“We had previously indicated the company could sustain debt to EBITDA close to or below 2x once it completes its North American refranchising in 2017, particularly if it also applied cash proceeds from its still-to-be-divested African bottler (CCBA) to debt reduction,” S&P said in a news release.

“However, a combination of the company's recently announced leverage target, still-high capital expenditures in the near term (to build out the company's enterprise resource planning [ERP] systems), ongoing dividend growth and additional debt-like tax liabilities related to the new U.S. tax law is likely to keep leverage closer to 2.5x over the next two years.”

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