Moody's upgrades Molson Coors by one notch and says it has enough cash to reduce debt while rewarding shareholders

Moody's Investors Service upgraded Molson Coors Beverage Co.'s (TAP) senior unsecured rating to Baa2 from Baa3 on Wednesday, and revised the outlook to positive. The move reflects "consistent debt repayment, conservative leverage targets and recent good revenue and EBITDA growth that is leading to solid debt to EBITDA leverage improvement to 2.6x as of the 12 months ended September 2023 (Moody's adjusted basis) as well as consistently strong free cash flow," the agency said in a statement. Molson announced a five-year $2 billion share buyback program at an October investor event and its intention to resume dividend growth after seven years of subdued activity. But it also committed to a new, slightly lower leverage target of below 2.5 times from the previous goal of achieving 2.5 times. "While the new share buyback and commitment to dividend growth are credit negative, Moody's expects the company to generate enough free cash flow to support its shareholder distribution policy and still generate sufficient cash to reduce debt," said the agency. It also expects the beverage company would temper shareholder rewards if needs be as it has in the past when faced with operating challenges or after acquisitions. The stock has gained 16% in the year to date, while the S&P 500 has gained 17%.

-Ciara Linnane

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11-15-23 0726ET

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