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AB InBev draws down entire $9bn loan facility

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Via Financial Times

Anheuser-Busch InBev, the world’s largest brewer by volume, has become the latest big company to bolster its cash position by drawing down the entirety of a $9bn loan facility from global banks, people with direct knowledge of the decision said. 

The brewer, which has been working to reduce a $95bn debt burden built up during a years-long acquisition binge, made a request to tap the facility late last week, these people said. 

In doing so, AB InBev joined a growing list of companies — including Boeing, Hilton Worldwide and IAG, the parent company of British Airways — rushing to secure cash from credit facilities. 

The cash will help preserve AB InBev’s financial flexibility as the brewer deals with the fallout from the coronavirus, which economists warn is weighing heavily on consumption across the globe. Restaurants, bars and pubs have been closed in several countries and sales of beer and spirits have dropped. 

AB InBev’s shares have lost more than half their value since the start of the year, plunging from €74.49 on January 2 to €34.88 by late on Monday. Its equity value has slumped to €58.96bn.

Line chart of Share price (€) showing AB InBev’s stock

The company said in a statement that it drew down on the credit facility from “time to time”. “At any given time, we work to have enough cash on hand to meet our liquidity needs for more than one year, especially in times of increased volatility. We have approximately $3bn of bond debt maturing in 2020,” it said.

John Gregory, head of leveraged finance capital markets at Wells Fargo Securities, said: “Everyone is scrambling a little bit, becoming defensive and trying to shore up their balance sheets any which way they can.” 

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He added that companies were triggering revolving credit lines that gave them access to pre-agreed amount of cash lent by banks. “There is concern about how much liquidity these companies have so there are also requests to increase revolver capacity.”

Companies in hard-hit industries, including airlines, cruise ship operators and hotel groups, have requested billions of dollars in emergency financing over the past two weeks to bolster their cash positions.

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Aircraft manufacturer Boeing last week borrowed the remainder of a $13.8bn loan, while United Airlines raised $2bn through a new financing and Royal Caribbean increased the size of its credit facility.

The $9bn will be lent to AB InBev from some of the biggest US, European and Japanese banks. Bank of America, BNP Paribas Fortis, Deutsche Bank, JPMorgan Chase, Mizuho, Société Générale and Bank of Tokyo-Mitsubishi UFJ were among the banks that previously agreed to underwrite the facility.

AB InBev has been struggling with an outsized debt burden since its acquisition of SABMiller in 2016. Net debt was down to $95.5bn at the end of December, from $104bn a year earlier, after the group halved its dividend, sold its Australian business and floated its Asian unit.

It now faces a severe hit to revenues as consumers stay at home as the Covid-19 outbreak spreads globally. Analysts at Bernstein said on Monday that they expected revenues in China — where the virus outbreak first hit — at Bud APAC, AB InBev’s majority-owned Asian division, to drop 29 per cent for the first quarter.

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The coronavirus crisis comes as AB InBev’s veteran chief financial officer, Felipe Dutra, prepares to leave the company in April. Credit rating agency Moody’s, which rates the company at Baa1, in December said the outlook was stable but warned that falling profitability or a failure to cut debt could lead to a downgrade.

Reporting by Arash Massoudi, Judith Evans, Joe Rennison, Stephen Morris in London and Eric Platt in New York

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