Fitch: British Tobacco view to negative

Fitch Ratings said it revised the outlook on British American Tobacco plc to negative from stable and affirmed its long-term issuer default rating at A-.

The short-term issuer default rating also was affirmed at F2.

Fitch also affirmed the senior unsecured long-term rating at A- on the debt issued by the company’s subsidiaries, B.A.T. International Finance plc and B.A.T. Netherlands Finance BV. The short-term debt rating also was affirmed at F2.

The actions follow the judgment issued by the Quebec Superior Court in Canada in favor of the plaintiffs, awarding a total of C$15.6 billion in damages, of which British Tobacco’s Canadian subsidiary, Imperial Tobacco Canada’s share would be C$10.4 billion, Fitch said.

The agency acknowledged the strong grounds for appeal and assumed that any cash outflows, if materialized, would be significantly below these numbers.

But, the unprecedented court ruling has heightened uncertainties regarding litigation risks, Fitch said.

The outlook revision considered the combination of these heightened litigation risks and the company’s already stretched credit metrics as a result of three mergers and acquisitions transactions, the agency said.

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