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Coca-Cola Company (The) -- Moody's rates The Coca-Cola Company notes A1; stable outlook

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Rating Action: Moody's rates The Coca-Cola Company notes A1; stable outlookGlobal Credit Research - 01 Mar 2021New York, March 01, 2021 -- Moody's Investors Service, ("Moody's") today assigned A1 ratings to new senior unsecured Euro and US dollar notes in multiple tranches, being offered by The Coca-Cola Company ("Coca-Cola"). The proceeds will be used for general corporate purposes including the repayment of existing debt. Coca-Cola's other ratings including the A1 senior unsecured and Prime-1 commercial paper ratings remain unchanged. The rating outlook is stable.The transactions are credit positive because they will improve liquidity by extending maturities without materially affecting cash interest costs and free cash flow.The following ratings/assessments are affected by today's action:New Assignments:..Issuer: Coca-Cola Company (The)....Senior Unsecured Notes, Assigned A1....Senior Unsecured Euronotes, Assigned A1RATINGS RATIONALEThe Coca-Cola Company's A1 rating reflects the Coca-Cola system's leading position in the global carbonated soft drink industry, including its ownership of one of the most valuable consumer brands in the world. The company has a highly diverse global operation network, a strong non-carbonated portfolio, and unrivaled distribution. These qualitative factors are tempered by the system's moderately high shareholder returns and elevated leverage following the Costa Coffee acquisition, EBITDA pressures in 2020 due coronavirus and uncertainty about its ongoing tax litigation with the IRS.Environmental, Social and Governance RiskThe rapid spread of the coronavirus outbreak, deteriorating global economic outlook, low oil prices, and high asset price volatility have created an unprecedented credit shock across a range of sectors and regions. Moody's regards the coronavirus outbreak as a social risk under our ESG framework, given the substantial credit implications of public health and safety. Some volatility can still be expected in 2021 due to uncertain demand characteristics, channel disruptions, and supply chain disruptions. For more information on research on and ratings affected by the coronavirus outbreak, please see moodys.com/coronavirus.In terms of Governance, The Coca-Cola Company benefits from a largely independent board. It has a publicly stated net debt to EBITDA leverage target of 2x to 2.5x but has engaged in acquisitions and relatively aggressive shareholder returns in recent years that have kept leverage high relative to its target range, at about 2.6x as of the end of year end 2020 according to the company. The company has suspended share repurchases in the wake of Coronavirus.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSThe stable rating outlook reflects the Coca-Cola system's diverse global beverage franchise, large and stable cash flows and good long-term growth opportunities. Moody's expects that system leverage will moderate over the next 12-18 months, driven by debt repayment and more modest shareholder returns. In the outlook, Moody's also assumes that Coca-Cola will refranchise Coca-Cola Philippines and Africa over the medium term and that any cash generated from the sale will largely be used for debt repayment. However, such divestitures are not assumed in our current forward view. Moody's assumes in the rating and stable outlook that the company will take prudent actions to offset any negative impacts on financial flexibility caused by any adverse tax litigation outcome, including the transfer tax case which the company estimates could result in a potential $12 billion liability.The ratings could be downgraded if operating performance weakens, there are large debt-funded acquisitions, shareholder returns, or adverse tax decisions. System debt to EBITDA expected to be sustained above 3.0x or system retained cash flow to net debt sustained below 12% could also result in a downgrade.The ratings could be upgraded if the company and the system demonstrate healthy growth, sustain strong profitability, commit to reduce leverage, if retained cash flow to net debt is sustained above 20%, if system debt to EBITDA is sustained below 2.5x, and the company has healthy operating cash flow.The principal methodology used in these ratings was Global Soft Beverage Industry published in January 2017 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1053179. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.The Coca-Cola Company, headquartered in Atlanta, Georgia, is the world's largest manufacturer, marketer and distributor of nonalcoholic beverage concentrates and syrups. Coca-Cola system goes to market through a network of bottlers. The Coca-Cola Company generates annual revenues of around $33 billion on a standalone basis, and Moody's estimates annual Coca-Cola system revenues at over $81 billion.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Linda Montag Senior Vice President Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 John E. Puchalla, CFA Associate Managing Director Corporate Finance Group JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 Releasing Office: Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. 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