TEXT-S&P: Beam Inc ratings unaffected by White Rock deal
April 23 - Standard & Poor's Ratings Services said today that its ratings on Beam Inc. (BBB-/Stable/A-3) are currently unaffected by the company's announcement that it agreed to acquire Pinnacle Vodka and Calico Jack rum brands and other assets from White Rock Distilleries for $605 million. We expect the company to complete the transaction, subject to customary closing conditions and regulatory approvals, in the 2012 second quarter. While we believe the acquisition will enhance Beam's presence in the large and growing vodka category, this acquisition follows the company's recent purchase of Cooley distillery, an Irish whiskey producer, and Beam intends to finance this acquisition with debt. We estimate that pro forma for acquisition, key credit ratios (including our standard adjustments) will weaken from adjusted 2011 year-end levels. Specifically, we believe the ratio of total debt to EBITDA will be about 3.8x, increasing from 3x for the year ended Dec. 31, 2011; and the ratio of funds from operations (FFO) to total debt will be about 18%, down from about 23.5%, for the same period. Although leverage will remain within the indicative ratio range of 3x-4x for the company's "significant" financial risk profile assessment, Beam's pro forma ratio of FFO to total debt will be weak relative to the indicative ratio range of 20%-30%. However, we expect future acquisitions and shareholder-friendly initiatives will be limited in the near-term until this credit measure has strengthened to above 20%.
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