Moody’s downgrades Bacardi to junk

Moody's Investors Service said it downgraded the senior unsecured ratings of Bacardi Ltd. and certain related subsidiaries to Ba1 from Baa1, and downgraded the company's short-term commercial paper rating to Not Prime from Prime-2.

The agency also assigned a Ba1 corporate family rating and Ba1-PD probability of default rating.

The outlook is stable.

Moody’s said the action follows Bacardi's receipt of Mexican regulatory approval to acquire the roughly 70% stake that it does not already own in Patron Spirits International AG (unrated). It will likely fund the transaction with new debt.

This concludes the review that was initiated on Jan. 22 when the company announced its intent to purchase the remaining stake in Patron. Management expects the acquisition to close within the next month.

"The downgrade is the result of the significant increase in leverage that will result from the all debt financed transaction," Moody's senior vice president Linda Montag said in a news release.

"Pro forma closing debt/EBITDA leverage will be 5.4x (including Moody's adjustments) up from 2.5x before the deal."

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