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Coca-Cola European Partners plc -- Moody's assigns Baa1 rating to CCEP and CCEP DAC's proposed notes; stable outlook

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Rating Action: Moody's assigns Baa1 rating to CCEP and CCEP DAC's proposed notes; stable outlookGlobal Credit Research - 20 Apr 2021Milan, April 20, 2021 -- Moody's Investors Service ("Moody's") has today assigned a Baa1 senior unsecured rating to Coca-Cola European Partners plc's ("CCEP", Baa1 stable) proposed notes and a Baa1 backed senior unsecured rating to the proposed notes issued by CCEP Finance (Ireland) DAC ("CCEP DAC"), a wholly-owned finance subsidiary of CCEP. The outlook is stable.Proceeds from the new notes will be utilized to fund the E5.9 billion acquisition of Coca-Cola Amatil Limited ("CCA", A3 on review for downgrade), together with existing liquidity resources.The rating of CCEP DAC proposed notes is at the same level as CCEP's Baa1 long term issuer rating as the notes benefit from an irrevocable and unconditional guarantee from the parent, CCEP.A full list of affected ratings can be found at the end of this press release.RATINGS RATIONALEThe rating of CCEP was downgraded to Baa1 from A3 on 19 April 2021 following the acquisition of CCA. The downgrade reflected the significant debt that CCEP will incur, which will result in a material increase in leverage and a deterioration in credit metrics. While the rating is initially weakly positioned in the Baa1 category, the stable outlook reflects Moody's expectation that CCEP will delever towards 4.0x by 2023 from 5.6x in 2021.CCEP's Baa1 rating benefits from a one-notch rating uplift, reflecting the implied support from Coca-Cola Company (The) ("TCCC", A1 stable).The Baa1 rating is supported by (1) CCEP's strong brand portfolio and market shares as the largest independent bottler in the Coke system; and (2) its steady profit growth and strong cash flow generation.CCEP's rating is constrained by (1) its high leverage following CCA's acquisition, (2) its exposure to the low-growth environment across Europe, Australia and New Zealand and demand volatility in emerging markets, and (3) the track record of significant shareholder distributions.RATIONALE FOR STABLE OUTLOOKWhile CCEP is weakly positioned in the Baa1 rating category due to the high initial leverage, the stable outlook assumes that the efforts to contain the spread of coronavirus will be successful, allowing a progressive normalization of the operating conditions in the company's core markets. Moody's expects that profits will start recovering in 2021 which will lead to a progressively improvement in credit metrics, with adjusted leverage returning towards 4.0x by 2023.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSUpward rating pressure over medium-term is unlikely owing to the initial high leverage, but it could develop overtime if operating momentum is strong and Moody's adjusted debt/EBITDA declines towards 3x.Downward pressure on CCEP's rating could develop if its operating performance does not show signs of improvement in 2021 and Moody's adjusted Debt/EBITDA does not return towards 4.0x by 2023.LIST OF AFFECTED RATINGS..Issuer: CCEP Finance (Ireland) DACAssignments:....BACKED Senior Unsecured Regular Bonds/Debentures, Assigned Baa1Outlook Action:....Outlook, Assigned Stable..Issuer: Coca-Cola European Partners plcAssignments:....Senior Unsecured Regular Bonds/Debentures, Assigned Baa1PRINCIPAL METHODOLOGYThe principal methodology used in these ratings was Global Soft Beverage Industry published in January 2017 and available at http://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.COMPANY PROFILECCEP was formed in May 2016 through the merger of three bottlers: Coca-Cola Enterprises, Inc., a producer, distributor and marketer of non-alcoholic beverages in Belgium, continental France, Great Britain, Luxembourg, Monaco, the Netherlands, Norway and Sweden; Coca-Cola Iberian Partners S.A.U., the Coca-Cola bottler for Spain, Portugal, Andorra and Iceland; and Coca-Cola Erfrischungsgetränke AG, which bottles, sells and distributes Coca-Cola branded products in Germany. In 2020, the company reported sales and EBITDA of E10.6 billion and E1.5 billion, respectively. The Coca-Cola Company has a 19% interest in CCEP, principals of the former Coca-Cola Iberian Partners S.A.U. own 36% and the rest is publicly traded.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 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. 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Ernesto Bisagno, CFA VP - Senior Credit Officer Corporate Finance Group Moody's Italia S.r.l Corso di Porta Romana 68 Milan 20122 Italy JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Ivan Palacios Associate Managing Director Corporate Finance Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's Italia S.r.l Corso di Porta Romana 68 Milan 20122 Italy JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 © 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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