Tiffany & Co. (SAS) -- Moody's upgrades the rating on Tiffany's 2024 and 2044 senior unsecured notes to A1 upon guarantee granted from LVMH

Rating Action: Moody's upgrades the rating on Tiffany's 2024 and 2044 senior unsecured notes to A1 upon guarantee granted from LVMHGlobal Credit Research - 17 Mar 2021New York, March 17, 2021 -- Moody's Investors Service, ("Moody's") today upgraded to A1 from Baa2 the ratings on Tiffany & Co.'s ("Tiffany") senior unsecured notes due 2024 and 2044. Concurrently, Moody's withdrew the Prime-2 commercial paper rating of Tiffany and its subsidiary Tiffany & Co. (SAS). The outlook was changed to stable.The upgrade to A1 of the senior unsecured notes rating reflects governance considerations including the impact from the unconditional senior unsecured guarantee granted by LVMH Moët Hennessy Louis Vuitton SE ("LVMH") (A1/Prime-1 stable) to the 2024 and 2044 notes upon the closing of the $15.8 billion all cash purchase by LVMH to acquire Tiffany. The outlook on Tiffany reflects the outlook of its new parent LVMH, which has guaranteed Tiffany's rated 2024 and 2044 senior unsecured notes. The commercial paper rating was withdrawn as the program has been terminated as a result of the transaction. This rating action concludes the review for upgrade that was initiated on October 30, 2020.Upgrades:..Issuer: Tiffany & Co.....Senior Unsecured Regular Bond/Debenture, Upgraded to A1 from Baa2Withdrawals:..Issuer: Tiffany & Co.....Senior Unsecured Commercial Paper, Withdrawn , previously rated P-2..Issuer: Tiffany & Co. (SAS)....Senior Unsecured Commercial Paper, Withdrawn , previously rated P-2Outlook Actions:..Issuer: Tiffany & Co.....Outlook, Changed To Stable From Rating Under Review..Issuer: Tiffany & Co. (SAS)....Outlook, Changed To Rating Withdrawn From Rating Under ReviewRATINGS RATIONALEThe A1 rating on Tiffany's senior unsecured notes reflects the company's acquisition by LVMH Moët Hennessy Louis Vuitton SE ("LVMH") (A1/Prime-1 stable) on January 7, 2021 and the unconditional guarantee provided to Tiffany's rated debt. The A1 rating of Tiffany's new parent, LVMH, reflects in its number one position in the luxury market worldwide, with E45 billion of revenue in 2020, its business and geographic diversity which is further increased by the acquisition of Tiffany, its portfolio of prestigious brands, and its historical robust free cash flow generation. The rating also incorporates the increased financial debt following the acquisition of Tiffany, sizeable non-debt commitments, a fairly high payout ratio for the rating level; and some exposure to fashion risk and economic cycles.The stable outlook reflects Moody's view that the coronavirus pandemic will not impair LVMH's robust business risk profile and that its earnings will return to historical growth levels once the pandemic has subsided. The stable outlook also incorporates the assumption that LVMH will not make any sizeable debt-funded acquisition over the next 18 months and that most of its free cash flow (after dividends) will be allocated to debt repayment. This will enable the group's credit metrics, which are currently affected by its increased gross debt to fund the acquisition of Tiffany and the pandemic-related disruption, to return to levels commensurate with its A1 rating in 2021-22.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSAlthough an upgrade is unlikely in the near future, Moody's could upgrade LVMH's ratings if it committed to maintaining a (gross) debt/EBITDA ratio of less than 2x and a funds from operations (FFO)/net debt ratio above 45%, on a Moody's-adjusted basis, on a sustainable basis. This would require higher-than-expected earnings growth as well as more moderate shareholder remuneration and restrained debt-financed acquisitions. A positive rating action would also hinge on a more balanced earnings contribution of each business division.A negative rating action on LVMH could occur if, on a Moody's-adjusted basis, its (gross) debt/EBITDA does not return to below 3x or if its FFO/net debt does not recover to above 35% within 18 months after the Tiffany acquisition. Such a scenario could unfold if the luxury goods industry takes longer to recover after the pandemic, key brands of LVMH show deterioration, or there are challenges with Tiffany's integration. LVMH's ratings could also be lowered if its financial policy has become more aggressive, as shown, for instance, by the occurrence of another sizable debt-financed acquisition over the next 18 months. LVMH's ratings could also be lowered if the credit quality of the group's controlling holding companies deteriorates significantly.With E45 billion of revenue in 2020, LVMH Moet Hennessy Louis Vuitton SE (LVMH), the parent of Tiffany & Co., is the world's largest luxury group, ahead of The Estee Lauder Companies Inc. (A1 stable), Compagnie Financière Richemont SA, EssilorLuxottica (A2 stable) and Kering SA. Its main shareholder is the Arnault Family Group, which held 47.48% of the capital and 63.46% of the voting rights as of 31 December 2020.The principal methodology used in these ratings was Consumer Packaged Goods Methodology published in February 2020 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1202237. 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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. Christina Boni Senior Vice President Corporate Finance Group Moody's Investors Service, Inc. 250 Greenwich Street New York, NY 10007 U.S.A. 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