Moody's may upgrade Keurig on merger news

Moody's Investors Service said it placed the Ba2 corporate family rating, Ba3-PD probability of default rating and Ba2 (LGD 3) debt instrument ratings of Keurig Green Mountain, Inc. under review for upgrade.

The review follows news that Keurig reached an agreement to merge with Dr. Pepper Snapple Group.

Dr. Pepper Snapple, a publicly traded company, will be the surviving legal entity and be renamed Keurig Dr. Pepper at closing.

The review for upgrade is based on an expectation that Keurig Dr. Pepper will have a stronger credit profile than Keurig, including enhanced scale, a broader brand and product portfolio and greater geographic diversity, Moody's said.

The agency said if the deal is structured and consummated as announced, Dr. Pepper Snapple's senior unsecured rating will be lowered by one notch to Baa2 with a negative outlook.

At the close of the proposed transaction, Moody's said it expects all of Keurig's rated debt will be repaid.

As a result, the existing ratings of Keurig Green Mountain will likely be withdrawn at closing, the agency said.

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