Moody's downgrades JAB

Moody's Investors Service said it downgraded the foreign and local currency long term issuer rating of JAB Holding Company Sarl to Baa2 from Baa1. Concurrently the agency downgraded the backed senior unsecured rating of JAB Holdings BV to Baa2 from Baa1. The agency changed the outlook to stable from negative.

Though the economic problems created by the coronavirus and the steep decline in oil prices played a role in the downgrade, Moody’s said it primarily attributed it to the company’s decision to unwind the wholly owned special purpose vehicle it established last year to tender shares of Coty Inc. and to repay the term loan B that funded the purchase of the tendered shares,

“The unwind comes at a time when the share price of Coty has fallen sharply and JAB would have been forced to sell shares or contribute cash to the SPV to comply with the LTV covenant of the term loan. The repayment of the term loan will be funded through cash on balance sheet of JAB Holding Co. Sarl. This will lead to an increase in net debt. Pro forma of the repayment, JAB's net debt will increase by close to 40% to around €5.8 billion,” Moody’s said in a press release.

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