Moody's changes Imperial outlook to negative

Moody's Investors Service said it affirmed the Baa3 issuer and long-term ratings of Imperial Tobacco Group plc and its guaranteed subsidiaries and changed the outlook to negative from stable following the announcement by the company of the planned acquisition of assets from Reynolds American Inc. following its purchase of Lorillard Inc., namely U.S. cigarette brands Winston, Maverick, Kool, Salem and e-cigarette brand blu, along with the national sales force, head office and production facilities currently owned by Lorillard, for a total consideration of $7.1 billion. The acquisition is expected to be 100% debt financed.

The agency said the negative outlook considers the business and financial risks stemming from what will be a transformative acquisition of cigarette brands and assets for Imperial in the United States. The transaction poses important long-term opportunities, but there are also significant execution risks, and Imperial’s financial leverage will increase significantly, Moody’s said.

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