Molson Coors CEO Sees Slowing Buyouts to Pay Debt
Molson Coors Brewing Co. (TAP) Chief Executive Officer Peter Swinburn said the company plans to hold off on making new acquisitions as it focuses on paying down debt from last year’s purchase of the Czech Republic’s StarBev LP.
While Molson Coors is keeping tabs on potential targets, that work is “academic” for now as the brewer improves its balance sheet, Swinburn said in an interview yesterday in New York. Any possible deal would need to provide a certain level of financial returns, he said, without providing the criteria.
“It could be small acquisitions for our international business, so maybe a small brewery in a state in India,” Swinburn said. “It could be a bigger acquisition.”
Molson Coors is suffering deeper bond-market losses than larger competitors such as Anheuser-Busch InBev NV (ABI) and SABMiller Plc (SAB) as it tries to reduce its leverage after the 2.65 billion-euro ($3.54 billion) takeover of Prague-based StarBev in June 2012.
Molson Coors’s $1.1 billion of 5 percent bonds due in May 2042 had declined about 11 cents on the dollar this year as of today to 100.2 cents with a yield of 5 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
“For the next one to two years, our free cash flow will be focused primarily on paying down debt in order to return our leverage ratio to the pre-StarBev acquisition levels,” Chief Financial Officer Gavin Hattersley said yesterday during an investor conference in New York. “An investment-grade rating is important to Molson Coors, and we have plans in place with the rating agencies to maintain it.”
Moody’s Investors Service rates the company’s debt Baa2, the second-lowest investment grade, with a stable outlook, while Standard & Poor’s rates it BBB-, its lowest investment-grade designation, with a negative outlook.
Molson Coors, based in Denver, rose 0.5 percent to $49.84 at the close in New York. The shares have risen 16 percent this year, compared with a 15 percent increase for the S&P 500 Index.
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