S&P downgrades Molson Coors

Standard & Poor’s said it lowered the ratings on Molson Coors Brewing Co., including the long-term corporate credit rating to BBB- from BBB+ and short-term ratings to A-3 from A-2.

All of the ratings on Molson Coors also remain on CreditWatch with negative implications.

The two-notch downgrade follows news that the company has entered into a definitive agreement with Anheuser-Busch InBev SA/NV to acquire the 58% stake in MillerCoors currently owned by SABMiller for about $12 billion.

The company said it intends to finance the acquisition with about 20%- to 25%-equity, S&P said, and the remainder with debt.

Based on this financing mix, the agency said it believes the debt-to-EBITDA ratio pro forma for the acquisition will be slightly more than 5x.

This is materially higher than expectations of leverage closer to 2x for the company to maintain the BBB+ rating, S&P said.

The acquisition will make Molson Coors the second-largest brewer in the United States with several leading brands, the agency said.

The ratings also consider that this transaction will lead to material synergies and is a strong strategic fit given that Molson Coors already owns 42% of MillerCoors and has close familiarity with MillerCoors management, S&P said.

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