Increased leverage from the Kronenbourg acquisition has led the credit rating agency Fitch Ratings to downgraded the senior unsecured debt and short-term ratings of Scottish & Newcastle to BBB and F3 from A-and F2 respectively.

The rating outlook was also changed to stable from negative on the UK's largest brewer.
"The rating downgrades reflect the significantly increased leverage from the debt-financed Kronenbourg acquisition for 1.5 billion sterling... the group's negative cashflow given its capex demands going forward and the effect of a larger dividend payment on Scottish & Newcastle's enlarged equity base," Fitch said in a statement. It said current debt levels were not expected to decline.

Fitch also pointed at possible increases in pension contributions, which would negatively impact financial ratings. It said it expected the company's pension deficit to have widened from 188 million sterling in April 2002, as 80% of its assets were held in shares.