Moody's downgrades Pepsi

Moody's Investors Service said it lowered PepsiCo, Inc.'s senior debt and senior credit facility to A1 from Aa3 and affirmed its commercial paper at P-1. This completes a review for downgrade that began on May 30, and the outlook is stable.

The agency also downgraded PepsiAmericas, Inc.'s senior debt to A1 from Aa3, Quaker Oats Co.'s senior debt to A1 from Aa3, Hillbrook Insurance Co.'s preferred stock to Baa2 from Baa1 and Pepsi Bottling Group, Inc.'s backed senior debt to A1 from Aa3.

"The downgrade reflects Pepsi's gradually increasing financial leverage as well as continued challenges in the North American beverage market" Linda Montag, senior vice president at Moody's, said in an agency news release.

Moody's expects that leverage will be between 2.6 and 3.0 times and that retained cash flow to net debt will be sustained below 25% in the next 12 to 18 months, metrics that are not consistent with the previous rating.

Pepsi's A1 rating reflects its strong snack food and beverage franchises, extensive global footprint, solid innovation pipelines, efficient operations and extensive and multifaceted distribution network as well as its excellent liquidity and solid financial performance, the agency said.

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