S&P lowers Yum! to junk

Standard & Poor's said it lowered the corporate credit rating on Yum! Brands Inc. to BB from BBB, along with the issue-level ratings on the company’s senior secured debt to BB from BBB.

The agency also said it assigned a 3 recovery rating, reflecting 50% to 70% expected default recovery.

S&P also said it removed the ratings from CreditWatch with negative implications, where it was placed in October 2015.

The downgrades primarily reflect an expectation for meaningfully higher leverage according to the company’s newly communicated financial policy, which includes a leverage target of about 5x, the agency said.

Yum! plans to return up to $6.2 billion to shareholders before completing the planned separation of its China division using new debt proceeds, S&P said.

This is a significant shift from the company’s previous financial policy and results in a re-assessment of the company’s financial risk profile as highly leveraged, the agency said.

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