S&P may up AmBev ratings

Standard & Poor's said it placed its B+ foreign currency and BBB- local currency corporate credit ratings on AmBev - Companhia de Bebidas das Américas on CreditWatch with positive implications.

The CreditWatch listing follows Brazil-based AmBev and Belgium-based Interbrew's (not rated) announcement on March 3 that they reached an agreement to combine their operations to form InterbrewAmBev. The BBB- rating on the political risk insured bonds issued by AmBev that are due in 2011 and 2013 are also placed on CreditWatch with positive implications.

"The CreditWatch placement reflects the overall benefits AmBev is likely to enjoy as a result of this transaction, which include increased geographic and portfolio diversification, entrance in less volatile markets such as Canada and the U.S., gains stemmed from expected economies of scale and enhanced production efficiency, and cross-licensing of its brands through Interbrew's network, among others," said S&P credit analyst Jean-Pierre Cote Gil.

S&P said the transaction should allow AmBev to be less dependent on the more volatile Brazilian market, which has been one of the major constraints to the ratings on AmBev. On the other hand, AmBev will also face the challenges of integrating the North American operations, collecting synergies, and operating in more mature, lower-margin markets, with a distinct competitive environment.

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