US CREDIT-InBev takeover may push Anheuser near junk rating
ju4 wa4i dia4n zo1ng he2 ba4o da4o :\n  By Anastasija Johnson\nNEW YORK, June 12 (Reuters) - Belgian brewer InBev's\nproposed takeover of Anheuser-Busch Cos Inc <BUD.N> could push\nthe iconic Budweiser maker's debt to the brink of junk\nterritory and send its bond spreads still wider.\nInBev <INTB.BR> on Wednesday made a $46.3 billion bid to\nadd Budweiser to its own Stella Artois and Beck's beers and\ncreate the world's largest brewer. For details click on\n[ID:nL12619037].\nInBev, the world's No. 2 brewer, said it plans to finance\nthe deal with at least $40 billion in debt and a combination of\nnon-core asset sales and equity in a move that could basically\ndouble Anheuser-Busch leverage.\nIf the deal goes through, the combined company's leverage,\na measure of debt to earnings before interest, tax,\ndepreciation and amortization, could reach 5 times compared to\nthe current 2.4 times level at the U.S. beermaker, analysts\nsaid.\nThis would make InBev's announcement that it is committed\nto maintaining an investment grade profile hard to keep, they\nadded.\n"It's a pretty stretched balance sheet for an investment\ngrade company," said Gimme Credit analyst Craig Hutson.\n"It could be right on the cusp of investment grade versus\nnon-investment grade. It's a very adverse effect for\nbondholders," Hutson added.\nAs of March end, Anheuser-Busch had approximately $9.1\nbillion of debt outstanding, which is rated "A2" and "A" by\nMoody's Investors Service and Standard & Poor's, the sixth\nhighest investment grade level.\nBoth rating agencies said on Thursday they may downgrade\nthe Budweiser maker because its credit measures will weaken\nwell below its current levels if the unsolicited bid is\naccepted.\nAnheuser said in a statement on Wednesday that it would\nreview the merits of the proposal and decide in due course.\nUnder its proposal, InBev would assume current Anheuser\ndebt. InBev CEO Carlos Brito in a webcast conference for\nanalysts said that new debt to finance the takeover was likely\nto be based in the United States for tax reasons.\nMerrill Lynch analyst Nico Lambrechts said in a research\nnote on Thursday that the takeover could be completely financed\nwith debt. For details, click on [ID:nL1219488].\nWhile the world's fourth largest brewer shares rose 5.0\npercent in afternoon trading on Thursday, its bonds weakened\nand the cost to insure its debt against default increased.\nAnheuser-Busch's 5.5 percent notes due in 2018 widened by\n14 basis points to 197 basis points over Treasuries, according\nto MarketAxess data.\nThe cost to insure its debt against default rose to about\n95 basis points, or $95,000 per year to protect $10 million of\ndebt for five years, compared to about 76 basis points on\nTuesday before InBev made the bid, according to a trader.\n"Given the heightened level of uncertainty for Anheuser, as\nwell as the potential for a significant leveraging event, we\nstill believe that investors should be buying protection on\nAnheuser-Busch at current levels," Barclays analysts said in a\nreport.\nWhile the deal makes strategic sense because it would\ncombine InBev's big operations in Western Europe, Brazil and\nCanada with Anheuser's business in the U.S., Mexico and China,\nit could take some time for the companies to reach an agreement\nbecause Anheuser is likely to try to negotiate a higher price,\nanalysts said. For details, click on [ID:nN12310419].\nThe good news for bondholders is that the combined company\ncould generate nearly $3 billion of annual free cash flow to\nrepay debt and quickly lower its leverage, according to Gimme\nCredit's Hutson.\nYet, "at the outset you are talking about a company that\nrelative to its investment grade peers would have a much worse\ncredit profile," Hutson said.\n(Reporting by Anastasija Johnson)\n((anastasija.johnson@thomsonreuters.com; 646-223-6342;\nReuters Messaging: Anastasija.Johnson.reuters.com@reuters.net))\nFor other related fixed-income quotations, stories and\nguides to Reuters pages, please double click on the symbol:\nU.S. corporate bond price quotations...<NASDBONDS>\nU.S. credit default swap column.CDV/]\nU.S. credit default swap news.CDV]\nEuropean corporate bond market report..[EUB/]\nEuropean corporate bond market report..[EUB/]\nCredit default swap guide.CDSINDEX>\nFixed income guide.BONDS>\nU.S. swap spreads report.SWP/]\nU.S. Treasury market report.US/]\nU.S. Treasury outlook.US/0]\nU.S. municipal bond market report......[MUNI/]\nKeywords: MARKETS CREDIT/