S&P puts Bacardi on watch

S&P said it placed all ratings on Bacardi Ltd. on CreditWatch with negative implications after Bacardi announced it will acquire the remaining stake in the Patron Spirits Co. that it does not already own.

The CreditWatch placement reflects the likelihood for significantly higher debt leverage pro forma for the acquisition compared with S&P’s current expectations depending on how much debt financing the company uses, S&P said.

“We estimate pro forma debt to EBITDA could exceed 5x if the transaction is 100% debt financed. This would be considerably more aggressive than our current expectations for the company to maintain debt to EBITDA near 2.5x,” S&P said in a news release.

“Therefore, we could lower the ratings at the completion of our review to the extent the transaction is largely debt financed. The CreditWatch will be resolved when the company publicly discloses its plan for financing the transaction.”

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