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Moody's affirms Anheuser-Busch InBev ratings

Moody's on March 30 affirmed the Baa1 senior unsecured and Prime-2 commercial paper ratings for Anheuser-Busch InBev SA and its affiliates and guaranteed debt.

It also assigned a Baa1 rating to the company's €4.5 billion drawdown under its Euro medium term note program. The ratings outlook is stable.

The rating agency also affirmed AB InBev's Baa1 issuer rating.

Moody's said the affirmation of the ratings reflects Moody's assumption that AB InBev has excellent liquidity to support temporary operating volatility despite it not being shielded from the negative impact of the coronavirus pandemic.

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The rating agency expects that growth will resume when conditions begin to normalize. Moody's believes that the company will be able to capitalize on its strong market position to deleverage even if the deleveraging path will be slowed by economic conditions in 2020. AB InBev is expected to act to pull through the current difficult environment to continue to reduce debt, the rating agency said.

The stable outlook reflects Moody's expectations that the company will complete the sale of its Australian subsidiary Carlton & United Breweries in the coming months and use the net proceeds to repay debt. Moody's also believes the company will consider all options to continue to reduce leverage even as EBITDA is likely to come under pressure as the impact from the virus is felt across its markets.

Moody's said it could upgrade AB InBev's rating if it manages to grow earnings and cash flow, sustain strong profit margins and reduce debt to EBITDA leverage to under 4x, as well as improve retained cash flow as a percent of net debt to over 10%.

Conversely, a downgrade is like if the company encounters operational challenges or if profitability falls. It could also be downgraded if debt to EBITDA leverage is not lowered to 4.5x or below by the end of calendar 2020, or if large shareholder returns or debt-funded acquisitions before the company has materially reduced leverage, Moody's said.