S&P equalizes Dr Pepper Snapple, Keurig ratings

S&P said it lowered its ratings on Dr Pepper Snapple Group Inc., including its corporate credit rating to BBB from BBB+ and removed the ratings from CreditWatch, where S&P placed them with negative implications on Jan. 29, 2018, upon the announcement of its merger with Keurig Green Mountain Inc.

Concurrently, S&P raised the ratings on Keurig Green Mountain to BBB from BB+ and removed the ratings from CreditWatch, where S&P placed them with positive implications on Jan. 29, 2018.

The outlook on both companies is stable.

At the same time, S&P said it affirmed the Dr Pepper Snapple Group A-2 short-term rating and lowered the senior unsecured issue-level ratings to BBB from BBB+. In addition, S&P raised the ratings on Keurig’s secured debt to BBB from BBB-.

Concurrently, S&P said it rated the proposed $8 billion senior secured notes BBB. The notes will be issued in six tranches, with maturities of 2021, 2023, 2025, 2028, 2038 and 2048. The notes will be issued by Maple Escrow Subsidiary, Inc. to be merged with and into Dr Pepper Snapple Group, Inc. which will be renamed Keurig Dr Pepper Inc. (KDP).

“Our rating on the newly formed combined company reflects our view that it will benefit from increased scale and product diversity as well as the strength of its brands, good profitability, solid cash flow generation capabilities, and participation in categories with good growth trends,” S&P said in a news release.

“We have also factored into the rating the company's substantial leverage and management's commitment to deleveraging quickly as well as lack of geographic diversity.”

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