AB InBev Cut by Moody's Amid Struggles to Trim Massive Debt Pile

(Bloomberg) -- Anheuser-Busch InBev NV’s credit rating was cut to the lowest tier of investment-grade by Moody’s Investors Service, which warned that the brewer is struggling to whittle its $100 billion debt load.

Moody’s lowered AB InBev’s senior unsecured debt ratings to Baa1 from A3, putting the world’s largest beermaker three steps from junk, the ratings firm said in a statement Monday. The brewer’s borrowings will remain high relative to its cash flow for the next few years -- even after it decided to slash dividend payouts to shareholders by half.

Plunging emerging-market currencies have sapped profits for the beer giant, leaving the company’s debt at about five times earnings before interest, taxes, amortization and depreciation, Moody’s said. AB InBev, based in Leuven, Belgium, has the biggest debt load in the global food and drink industry.

“Deleveraging is behind original expectations due largely to foreign currency fluctuations and underperformance of certain emerging economies,” Moody’s analysts led by Linda Montag said in the statement.

AB InBev’s liabilities mushroomed as part of its 2016 acquisition of SABMiller. Moody’s expects the company will trim its leverage to about four times Ebitda in the next two years. If the Hoegaarden brewer can’t cut that ratio to 4.5 or lower by the end of 2020, Moody’s said it could lower the credit rating even further.

Barclays Plc analysts said in October that the company would need to suspend its dividend completely to reduce its debt to four times Ebitda.

Credit investors have become increasingly wary of the company as its financial position has deteriorated. The premium over benchmark debt charged to hold its 3.65 percent note in dollars due February 2026 has soared from a six-month low of 98 basis points on July 26 to 163 basis points.

Standard & Poor’s has an A- rating on AB InBev’s long-term debt, which has been on review for a downgrade since March 2017.

--With assistance from John Glover.

To contact the reporter on this story: Olivia Carville in New York at ocarville1@bloomberg.net

To contact the editors responsible for this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net, Shannon D. Harrington, Thomas Mulier

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