Fitch: PepsiCo view negative

Fitch Ratings said it revised PepsiCo, Inc.'s outlook to negative from stable and affirmed its long-term issuer default rating, senior debt and bank credit facilities at A+ and its short-term issuer default rating and commercial paper program at F1.

The rating action follows the company's announcement that it will acquire a 66% stake in Wimm-Bill-Dann Foods OJSC for approximately $3.8 billion.

The agency said the negative outlook reflects PepsiCo's leverage, which is currently high for the A+ rating category, and the size of the acquisition size, which is larger than Fitch's expectation for a tuck-in acquisition.

The ratings reflect PepsiCo's diverse food and beverage product mix, comprehensive geographic footprint and ability to consistently generate substantial operating cash flow, Fitch said.

For the 12 months ended Sept. 4, PepsiCo's total debt-to-operating EBITDA ratio was 2.1 times. The agency said leverage is closer to 2.0 times after factoring in Wimm-Bill-Dann's EBITDA, its outstanding debt and the anticipated commercial paper funding of a portion of the acquisition.

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