Bloomberg News

Pernod Sells $1.5 Billion of Debt After Investment-Grade Boost

October 20, 2011

Oct. 20 (Bloomberg) -- Pernod Ricard SA raised $1.5 billion selling bonds to repay loans after the maker of Chivas Regal whisky had its credit rating lifted to investment grade by Standard & Poor’s and Moody’s Investors Service.

Pernod is paying its lowest coupon on record for debt maturing in more than 10 years, according to data compiled by Bloomberg. Its 4.45 percent senior unsecured notes due in January 2022 yield 230 basis points more than similar-maturity Treasuries. That compares with a spread of 245 basis points on its first U.S. dollar bond sale in April, when the Paris-based company issued $1 billion of 5.75 percent notes maturing in April 2021.

S&P boosted Pernod’s credit rating one step this month, following a similar move from Moody’s in September, as Europe’s second-largest distiller seeks to reduce borrowings to around 4 times adjusted earnings before interest, taxes, depreciation and amortization by June 2012. The company is working to refinance a syndicated bank loan maturing in July 2013, which had 4.3 billion euros ($5.9 billion) outstanding at the end of June from 6.9 billion euros a year earlier, according to S&P.

“The upgrade primarily reflects our view of Pernod’s progress in reducing its debt leverage, in line with its recently revised financial policy,” S&P analysts Florence Devevey and Nicolas Baudouin wrote in a note on Oct. 3. “Pernod should be able to successfully refinance its bank facility maturing in 2013 within the next 12 months.”

Pernod reiterated its debt to EBITDA goal today as it reported first-quarter “organic” revenue growth of 11 percent today after a gain of 8 percent last year.

The company reported debt of 9 billion euros as of June 30, or 4.4 times adjusted Ebitda.

The company got a lower borrowing cost than similarly rated companies, as the average BBB bond yields 4.58 percent, according to Bank of America Merrill Lynch index data.

Sonoco Products Co., the maker of packaging products, sold $500 million of debt to fund its acquisition of Tegrant Corp. today, Bloomberg data show. Lab instrument-maker PerkinElmer Inc. issued $500 million of 5 percent, 10-year notes.

--With assistance from Clementine Fletcher in London. Editors: Alan Goldstein, Mitchell Martin

To contact the reporter on this story: Sapna Maheshwari in New York at sapnam@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net


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