S&P rates San Miguel preferreds B

Standard & Poor's said it revised Philippines-based San Miguel Corp.'s outlook to stable from negative, affirmed the company's BB foreign currency corporate credit rating and assigned a B rating to the proposed five-year benchmark non-callable, non-cumulative, non-voting, perpetual preferred shares to be issued by San Miguel Capital Funding Ltd.

Proceeds from the preferred shares issue will be used to purchase a similar amount of subordinated debt due 2036 to be issued by San Miguel, which in turn will be used to prepay existing debt of about $300 million. The remainder will be used for general corporate purposes, including capital expenditure and future acquisitions.

The outlook revision reflects the agency's view that, based on the company's own guidelines, San Miguel is likely to be less aggressive and acquisitive in its growth strategy, thereby reducing the likelihood of further deterioration in its financial risk profile.

S&P said the ratings on San Miguel are supported by its dominant position in the domestic food and beverage industry, increased diversity through overseas operations and favorable cost structure.

These advantages are offset by the company's aggressive financial profile, although its capital spending is expected to moderate, and by the company's high operating risks, weaker overseas market positions and earnings exposure to volatile raw material costs and supply, the agency said.

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