S&P: Dr. Pepper notes BBB+

S&P said it assigned a BBB+ rating on Dr. Pepper Snapple Group Inc.'s proposed 10-year senior unsecured notes.

The proceeds will be used to repay an upcoming bond maturity and for general corporate purposes, the agency said.

The company benefits from strong and stable profit margins, above-average volume growth in several brands across its carbonated and noncarbonated portfolios and ongoing productivity gains, S&P said.

This should allow for continued above-average industry EBITDA growth, the agency added.

The company also has very defendable market positions given the strength of its core and difficult-to-replicate Dr. Pepper brand, the customer loyalty across many of its flavored carbonated drinks and its strong brands in non-carbonated drinks, S&P said.

The company should continue to generate strong free cash flow, well in excess of $750 million annually, which is expected to fund its annual dividend of about $300 million to $350 million and an additional annual share repurchases of at least $600 million, the agency said.

This will lead to negative discretionary cash flow, but is not likely to materially weaken the company's debt-to-EBITDA ratio, S&P said.

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