Moody’s lowers Reckitt Benckiser

Moody's Investors Service said it downgraded the long-term issuer rating of Reckitt Benckiser Group plc (RB) and long term debt ratings of its subsidiary Reckitt Benckiser Treasury Services plc to A3 from A1.

The agency also downgraded the short-term ratings of Reckitt Benckiser Treasury Services to P-2 from P-1.

The outlook is stable.

Moody’s said the action follows the June 12 announcement that RB received all the regulatory approvals to complete the acquisition of 100% of Mead Johnson Nutrition Co. (Baa1 under review for upgrade) for about $16.7 billion, plus net debt of $1.2 billion. This concludes the review that began on Feb. 3, when RB publically stated that it was in in advanced negotiations to buy Mead.

"RB's two-notch downgrade to A3 from A1 reflects the significant debt and resulting high leverage that it will incur to fund the Mead deal," Ernesto Bisagno, Moody's vice president, senior credit officer and lead analyst for RB, said in a news release.

"Moody's expects RB's leverage pro forma for the acquisition to increase to approximately 4.4x at December 2017 from 0.9x for RB on a standalone basis based on the full year 2016 results. However, Moody's expects RB to delever toward 3.0x by 2019 through a combination of EBITDA growth and debt repayments."

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