Fitch Ratings has affirmed The ratings apply to approximately
A full list of affirmed ratings follows at the end of this release.
KEY RATING DRIVERS
Market Leading Positions
Accelerating Secular Volume Decline
The U.S. marketplace for tobacco cigarettes continues to dwindle by the mid-single digits annually as the smoking population declines (adults that smoked fell to record low of 18 percent of the U.S. population in 2012). Cigarette consumption in the U.S. has fallen by compound annual rate of 2.5 percent through 2012 since peaking at 640 billion sticks in 1981. The annual decrease has accelerated to 4.4 percent per year in 2007 to 2012 representing approximately 15 billion fewer cigarettes consumed annually.
Steady Leverage Despite Volume Pressure
SABMiller Stake Supports Strong Liquidity
Financial Strategy Emphasizes Heavy Shareholder Returns
Limited acquisition opportunities and light capital spending (at or below 1 percent) affords
Moreover, share repurchases significantly increased to more than
Industry Factors Limit Ratings Upside
A positive action to current credit ratings is restrained by key factors in the mature industry, specifically secular volume declines, high litigation exposure, rising regulatory risks and an accommodative shareholder stance.
Future developments that may individually or collectively, lead to a positive rating action:
--Mitigation of negative industry factors with an emphasis on the slowing or reversal of secular volume declines;
--Significantly reducing litigation risk, most notably the Engle progeny exposure;
--A commitment to a conservative financial strategy demonstrated by lower dividend payouts and less-aggressive share repurchasing.
Future developments that may individually or collectively, lead to a negative rating action:
--EBITDA pressures arising from greater-than-expected market contraction resulting from accelerated volume declines or a heightened competitive environment, such that gross debt leverage rises and stays around 2.5x;
--Regulatory decisions immediately banning sale of mentholated cigarettes or meaningfully increasing excise taxes on smoking products that significantly further suppresses volume and demand;
--Dramatic changes in the litigation process, whereby legal cases may reach verdict quicker and/or material adverse judgments significantly increase.
--Long-term Issuer Default Rating (IDR) at 'BBB+';
--Guaranteed bank credit facility at 'BBB+';
--Guaranteed senior unsecured debt at 'BBB+';
--Short-term IDR at 'F2';
--Commercial paper (CP) at 'F2.'
--Long-term IDR at 'BBB+';
--Short-term IDR at 'F2';
--CP at 'F2'.
--Senior unsecured debt at 'BBB+'.
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Fitch Ratings has affirmed
The ratings apply to approximately