TEXT-S&P keeps Coca-Cola Hellenic ratings on watch negative

Oct 17 - Overview
-- Greece-based beverage group Coca-Cola Hellenic Bottling Co. S.A.
(CCH) has announced a voluntary exchange offer, which, if successful,
would involve the CCH group moving its domicile from Greece to Switzerland.
-- We understand that this move is subject to a 90% shareholder
acceptance as part of the voluntary share exchange offer.
-- We are therefore keeping our 'BBB+/A-2' corporate credit ratings on
CCH on CreditWatch negative, where they were initially placed on June 7, 2012.
-- The CreditWatch negative primarily reflects the uncertainty
surrounding the outcome of the transaction.
Rating Action
On Oct. 17, 2012, Standard & Poor's Ratings Services kept its 'BBB+' long-term
and 'A-2' short-term corporate credit ratings on Greece-based beverage group
Coca-Cola Hellenic Bottling Co. S.A. (CCH) on CreditWatch with negative
implications, where they were initially placed on June 7, 2012.

At the same time, we also kept our 'BBB' issue rating on CCH's senior
unsecured debt on CreditWatch negative.

Rationale
The ongoing CreditWatch reflects our understanding that the group's announced
change of domicile to Switzerland from Greece, and its subsequent listing on
the London Stock Exchange (LSE), is subject to a 90% shareholder acceptance as
part of a voluntary share exchange offer. We understand that 60.7% of shares
have already been irrevocably tendered for exchange. In addition, the group
may make a cash consideration as part of the transaction, which it intends to
refinance. While we view these strategic management changes as positive from a
credit perspective, the CreditWatch also reflects execution risk due to
potentially volatile capital markets. The CreditWatch also incorporates our
assessment of economic and political pressures in Greece (Hellenic Republic;
CCC/Negative/C) and the potential negative implications for CCH in the event
of a Greek exit from the eurozone (European Economic and Monetary Union or
EMU).

Our ratings on CCH are based on the group's stand-alone credit profile (SACP),
combined with our view of implicit and extraordinary support from The
Coca-Cola Co. (Coke; AA-/Stable/A-1+). CCH's SACP is based on our assessment
of its "intermediate" financial risk profile and "satisfactory" business risk
profile, as our criteria define these terms. We note that as part of the
transaction, CCH's bottling agreements will be extended in full until 2023.

We note that CCH derives less than 10% of its earnings from Greece. Our
criteria states that the ratings on CCH should not therefore be capped by the
Greek sovereign rating. (See "Nonsovereign Ratings That Exceed EMU Sovereign
Ratings: Methodology And Assumptions", published June 14, 2011, on
RatingsDirect on the Global Credit Portal.)

Continued weak consumer sentiment in southern Europe and potential input cost
volatility are likely, in our view, to challenge CCH's profitability and
volumes in 2013. In 2012 the group's profitability has continued to face
pressure, albeit to a lesser extent than in 2011.

Liquidity
The short-term rating on CCH is 'A-2'. This reflects our long-term corporate
credit rating on the group, as well as our view of CCH's liquidity as
"adequate" under our criteria. We assess that liquidity sources will cover
liquidity uses by at least 1.2x over the next 12 months. We estimate that
CCH's liquidity sources over the next 12 months comprise:
-- Cash and cash equivalents of EUR466 million at the end of June 2012;
-- An undrawn EUR500 million committed credit facility maturing in 2016;
and
-- Unadjusted funds from operations (FFO) of about EUR600 million (adjusted
FFO of about EUR650 million).

We estimate that CCH's liquidity uses over the next 12 months comprise:
-- Short-term debt of close to EUR264.7 million at the end of June 2012;
-- Capital expenditures of between EUR450 million and EUR500 million;
-- A $500 million bond maturity in September 2013; and
-- A dividend or capital return to shareholders of between EUR100 million
and EUR150 million.

If the share exchange offer is successful the following facilities will also
be available:

-- A EUR550 million acquisition facility to be used to fund any cash
consideration required as part of a compulsory buyout. This new facility
matures in July 2014 or, if earlier, 18 months after the Swiss holding company
issues a prospectus relating to admittance of the new shares to the LSE.
-- A EUR500 million revolving loan facility to be used for general
corporate purposes, only if it is needed to replace the existing credit
facility. This new facility matures in July 2014 or, if earlier, 18 months
after the Swiss holding company issues a prospectus relating to admittance of
the new shares to the LSE.
-- A EUR500 million facility to be used if needed to refinance the group's
long-term debt. This facility matures on either the date that the acquisition
facility matures or in March 2014, whichever is later.

We note that there are no financial covenants under any of the facilities,
including those in place prior to the exchange offer and those put in place as
part of the exchange offer.

If the share exchange offer is unsuccessful and the group is unable to
refinance its upcoming debt maturities, the "adequate" liquidity position
could come under pressure.

CreditWatch
The ongoing CreditWatch primarily reflects the uncertainty surrounding the
change of domicile and the LSE listing. If these can be successfully
addressed, the future rating direction will depend on CCH's operating
performance and support from Coke. If there is insufficient shareholder
acceptance, a multi-notch downgrade could still be possible as a result of
risks associated with Greece exiting the eurozone and the potential impact of
Greek government policies on CCH's business and financial environment. As the
exchange offer is subject to a shareholder agreement, we view the above risks
as applicable to our analysis.

The ratings could also come under pressure if there is a deterioration in the
group's operating performance. This could occur if continued weak consumer
sentiment in Europe and/or input cost inflation put pressure on the group's
volumes and/or margins. In addition, we could lower the ratings if CCH does
not maintain an "adequate" liquidity position.

Furthermore, because the ratings on CCH incorporate our assumption of support
from Coke, we could lower our ratings on CCH if we see deterioration in Coke's
credit quality, a change in the level of implicit support from Coke, or a
change in the mix of implicit and extraordinary support from Coke.

We aim to resolve the CreditWatch once we have more information about the
success of the exchange and we have clarity about the amount and method of
potential refinancing of any cash consideration. A successful exchange would
likely reduce the downward rating pressure on resolution of the CreditWatch.
If the exchange is unsuccessful, downward rating pressure would likely be
greater; that said, assuming liquidity remains "adequate," we consider it
unlikely that the ratings will fall into the speculative-grade category under
such a scenario.

Related Criteria And Research
All articles listed below are available on RatingsDirect on the Global Credit
Portal, unless otherwise stated.
-- Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18.
2012
-- Methodology And Assumptions: Liquidity Descriptors For Global
Corporate Issuers, Sept. 28, 2011
-- Principles Of Credit Ratings, Feb. 16, 2011
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
-- 2008 Corporate Criteria: Ratios And Adjustments, April 15, 2008

Ratings List
Ratings Remain On Watch

Coca-Cola Hellenic Bottling Co. S.A.
Corporate Credit Rating BBB+/Watch Neg/A-2
Commercial Paper A-2/Watch Neg

Coca-Cola HBC Finance B.V.
Senior Unsecured * BBB/Watch Neg
Commercial Paper * A-2/Watch Neg

Coca-Cola HBC Finance PLC
Commercial Paper * A-2/Watch Neg
*guaranteed by Coca-Cola Hellenic Bottling Co. S.A.

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