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FRANCE: Ratings agencies move Pernod Ricard upwards

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Standard & Poor's has joined Moodys in nudging Pernod Ricard into investment grade territory, but only on the proviso that the French drinks giant does not loosen its purse strings for a big acquisition.

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Pernod's progress on cutting debt is paying off with the world's major credit ratings agencies. Standard & Poor's has this week upgraded the firm to BBB-/A-3, from BB+/B'. 

The move means that Standard & Poor's (S&P) has joined rival Moodys in returning Pernod to an investment grade rating. It is a lift for Pernod, which has been cutting debt since the acquisition of Absolut vodka owner Vin & Sprit for EUR5.63bn (US$8.88bn) in 2008

However, like Moodys last month, S&P warned that its upgrade has several strings attached. "We would consider a downgrade if Pernod exhibits signs of a looser financial policy," said S&P, "such as an unexpected share buyback programme or a largely debt-financed, sizable acquisition."

The agency said that it expects Pernod to refinance debt due in 2013 within the next 12 months.

Pernod has targeted a net debt to EBITDA ratio of "close to four" by the end of its current fiscal year, which runs to the end of June 2012. This ratio was 4.4 at the end of June this year.

The prospect of spirits industry consolidation has grown since Fortune Brands said it would transform its Beam Global Spirits & Wine business into a standalone entity. Yesterday, the new-look Beam Inc began trading, but Pernod seems determined to maintain its debt focus. 

"In terms of M&A, a massive acquisition short-term is not on the agenda,” Pernod's CFO, Gilles Bogaert, told analysts and journalists last month


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