FITCH Rates Pepsico's $2.75b Issuance 'A'; Outlook Stable

March 5 (Reuters) - HICAGO, March 05 (Fitch) Fitch Ratings assigns an
'A' rating to PepsiCo, Inc.'s
(PepsiCo) issuance of $750 million of 0.75% notes due 2015, $1.25 billion of
2.75% notes due 2022, and $750 million of 4% notes due 2042. The Rating Outlook
is Stable.

The notes will be issued by PepsiCo, Inc. and will rank equally with PepsiCo's
senior unsecured obligations. PepsiCo plans to use the net proceeds for general
corporate purposes. The notes are being issued under the company's existing
indenture dated May 21, 2007. Significant covenants include limitations on
secured debt. PepsiCo is not bound by any financial covenants. The notes are
callable by PepsiCo subject to a make-whole provision. PepsiCo had approximately
$26.8 billion of debt at Dec. 31, 2011.

The company's ratings reflect its ability to consistently generate significant
cash flow from operations of almost $9 billion annually. This is enabled by its
healthy operating EBITDA margins of around 20%. Over the past five years, the
combination of PepsiCo and its bottlers, acquired in 2010, has produced in
excess of $2.2 billion of free cash flow (FCF) annually. PepsiCo produced over
$2.4 billion of FCF in 2011. PepsiCo's cash flow provides it considerable
financial flexibility.

The ratings incorporate PepsiCo's generally shareholder-friendly position as
share buybacks have averaged a net $2.5 billion annually over the past five
years, using substantially all of its FCF. PepsiCo is currently operating under
a three-year $15 billion share repurchase program authorized in 2010. Fitch
estimates PepsiCo has $10.8 billion remaining under the authorization as of Dec.
31, 2011. PepsiCo intends to repurchase at least $3 billion of shares in 2012.
The company's large dividend of more than $3.1 billion for the year ended Dec.
31, 2011 has grown over 11% annually for the past five fiscal years.

Fitch believes the company desires continuing access to the tier 1 commercial
paper (CP) market and as such is likely to maintain credit metrics suitable for
the 'A' rating level. Negative rating actions are possible if significant
debt-financed acquisitions or share repurchases or deteriorating operating
performance increase leverage towards 2.5 times (x) on a total debt to operating
EBITDA basis. Substantial declines in FCF would also likely prompt negative
rating actions. Positive rating actions are possible if PepsiCo maintains
leverage below 2.0x and Fitch believed PepsiCo would manage its balance sheet to
sustain an 'A+' rating.

PepsiCo's volume growth has been under pressure in North America, its largest
market, as the company has taken pricing actions to offset commodity cost
increases. Core revenue growth as a result has not been as robust as
historically. Margins have compressed due to the acquisition of the bottlers,
which operated at lower margins, and commodity cost inflation. The bottler
integration is progressing as anticipated, and PepsiCo is expected to achieve
its synergy goals in 2012 which should help offset continuing margin pressures.

PepsiCo has announced a three year productivity program which the company
expects to generate $500 million in incremental cost savings annually in 2012,
2013 and 2014, and it will largely fund heightened marketing. PepsiCo expects
the productivity program to require $550 million of cash expenditures in 2012
with an additional $175 million in expenditures to be incurred during the period
from 2013 through 2015. PepsiCo plans to increase its advertising and marketing
expenditures by $500 million to $600 million in 2012 with the level of marketing
growing at the same rate the company grows in 2013 and beyond. The cash outlay
is likely to weigh on credit protection measures in 2012.

For the year ended Dec. 31, 2011, PepsiCo's total debt-to-operating EBITDA was
2.1x, similar to 2010 year-end at 2.1x. The company's coverage increased to
15.2x at Dec. 31, 2011 from 13.4x at 2010 year-end. The increase was caused by
lower interest costs. Funds from operations (FFO) adjusted leverage decreased to
2.8x at Dec. 31, 2011 from 3.1x at 2010 year-end as PepsiCo lapped $1.2 billion
of pension contributions in 2010. PepsiCo plans to make a further $1 billion
contribution to its pension plans in 2012 which will weigh on FFO metrics.

PepsiCo has sizable liquidity with $4.1 billion of cash, a substantial portion
of which is offshore, and combined capacity of $5.85 billion under its 364-day
and four-year revolving credit facilities, which expire in June 2012 and June
2015, respectively. PepsiCo had approximately $3 billion of CP at Dec. 31, 2011
and currently has a manageable maturity schedule with $2,549 million due in
2012, $2,841 million in 2013 and $3,335 million due in 2014. Fitch expects
PepsiCo to refinance its maturities. Fitch believes the proceeds from the
aforementioned debt issuance may be used to prefund the refinancing of the 2012
maturities.

PepsiCo guarantees all of the senior notes of its bottling subsidiaries -
Pepsi-Cola Metropolitan Bottling Company (wholly owned by PepsiCo; PMBC) and
Bottling Group, LLC (wholly owned by PMBC). While the notes of PMBC and Bottling
Group, LLC are structurally superior to the notes issued by PepsiCo, Inc., Fitch
has chosen not to make a distinction in the ratings at the single-A level
because default risk is very low.

PepsiCo's ratings are supported by the company's numerous valuable brands across
food and beverage categories. PepsiCo has 22 different brands that each generate
over $1 billion in annual sales. Its brands are also global, providing not only
product line revenue diversification but also international revenue
diversification.

Fitch's currently rates PepsiCo as follows:

PepsiCo (Parent)

--Long-term Issuer Default Rating (IDR) 'A';

--Senior unsecured debt 'A';

--Bank credit facilities 'A';

--Short-term IDR 'F1';

--CP program 'F1'.

PMBC (Operating Company/Intermediate Holding Company)

--Long-term IDR 'A';

--Guaranteed bank credit facilities 'A';

--Guaranteed senior notes 'A'.

Bottling Group, LLC (Operating Company)

--Long-term IDR 'A';

--Guaranteed senior notes 'A'.

The Rating Outlook is Stable.

Contact:

Primary Analyst

Christopher M. Collins, CFA

Director

+1-312-368-3196

Fitch, Inc.

70 W. Madison St.

Chicago, IL 60602

Secondary Analyst

Carla Norfleet Taylor, CFA

Director

+1-312-368-3195

Committee Chairperson

Wesley E. Moultrie II, CPA

Managing Director

+1-312-368-3186

FITCH RATES PEPSICO'S $2.75B ISSUANCE 'A'; OUTLOOK STABLE