TEXT-S&P rates PepsiCo proposed notes 'A-'
Aug 8 - Standard & Poor's Ratings Services today assigned its 'A-' senior unsecured debt rating to Purchase, N.Y.-based PepsiCo Inc.'s (A/Stable/A-1) proposed senior unsecured notes consisting of a three-year, five-year, and 10-year fixed-rate tranches (actual amounts and maturity dates to be finalized at the close of the transaction). PepsiCo will issue the notes under the company's Rule 415 shelf registration. Our rating on PepsiCo's senior unsecured debt, which is at the holding company, reflects our opinion that this debt is structurally subordinated to priority obligations at its operating entities, which generate substantially all of its cash flow and account for a significant portion of total assets but do not guarantee this debt. PepsiCo has indicated that it plans to use the net proceeds from this offering for general corporate purposes, including the repayment of commercial paper. The corporate credit rating on PepsiCo reflects our assessment of the company's business risk profile as "excellent" and financial risk profile as "intermediate" (as defined in our criteria). Key credit factors considered in our business risk assessment include PepsiCo's geographic diversification and balanced portfolio of businesses, with its strong positions and well-known brands in the relatively stable, cash-generating liquid refreshment beverage and snack food industries. Our financial risk profile incorporates our belief that PepsiCo's financial policies are aggressive, including its active share repurchase and acquisition program, which have led to higher debt. We expect key credit measures will remain on the weak end of the indicative ratios for an intermediate financial risk profile, which include leverage, as measured by total debt to EBITDA, of 2x-3x, and funds from operations to total debt of 30%-45%. RELATED CRITERIA AND RESEARCH -- Key Credit Factors: Criteria For Rating The Global Branded Nondurable Consumer Products Industry, April 28, 2011 -- Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, May 27, 2009 RATINGS LIST PepsiCo Inc. Corporate Credit Rating A/Stable/A-1 New Rating PepsiCo Inc. sr unsecd notes due 2015, 2017, 2022 A- Complete ratings information is available to subscribers of RatingsDirect on the Global Credit Portal at www.globalcreditportal.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column.
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