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March 6, 2009

S&P cuts San Miguel rating

Standard and Poor’s Ratings Services (S&P) on Thursday cut the credit rating of San Miguel Corp. (SMC), citing the conglomerate’s shift in its focus to heavy industries and efforts to shed its core business, reported Manila Times.

S&P said it trimmed SMC’s long-term foreign-denominated credit rating from ‘BB’ to ‘BB minus’ while keeping a stable outlook. The stable outlook means the rating company is likely to maintain its current below-investment grade rating of “BB minus” on Southeast Asian’s biggest food and beverage company.

The firm said SMC’s reduction of its stake in San Miguel Brewery Inc. (SMB), its domestic beer business, and its increasing exposure to utilities and infrastructure merited the downgrade.

“In our opinion, San Miguel is expanding into sectors that are exposed to more uncertain operating and regulatory domestic environments. In addition, we believe these sectors are capital intensive, riskier, and have lower profit margins than San Miguel’s traditional beer business,” Allan Redimerio, S&P credit analyst, said.

The ratings firm said it has taken into account Kirin Holdings Co.’s possible purchase of a significant stake in SMB, which contributes majority to the Philippine conglo¬merate’s income.

“We believe the reduced access to SMB’s cash flows weakens the company’s credit metrics,” the analyst said.

Last month, Kirin announced it will buy 43.25 percent of SMB from the parent for 58.9 billion peso, or 8.841 peso a share. In addition, Kirin is also looking to acquire a 5.75-percent stake in SMB from the public through a tender offer.

In return, Kirin will sell its 19.9-percent stake in SMC to local investment management firm Q-Tech Alliance Holdings, led by Eric Recto of the Ashmore Group to partly finance the acquisition of SMB.

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