Molson Coors Beverage Company
New Coverage/Issuer Covenant Card: Molson Coors Beverage Co.
Thu 11/05/2020 15:21 PM
Relevant Items:
Molson Coors Covenants Tear Sheet, Debt Documents Summaries
Molson Coors Covenants Debt Documents
Molson Coors Beverage Co. (“MCBC”), which announced in October 2019 that it was moving its headquarters from Denver, Colo., to Chicago, Ill., was created by the 2005 merger of the Canadian brewer Molson Inc. and the U.S. brewer Adolph Coors Co. It owns a diverse portfolio of global brands such as Blue Moon, Coors Light¸ Miller Genuine Draft and country-specific brands such as Croatia’s Ožujsko and the Czech Staropramen. Continue reading for the Covenants team's analysis of the Molson Coors Beverage covenant and request a trial to access reporting and analysis of hundreds of other stressed, distressed and performing credits.
As MCBC reported in its 10-Q for fiscal quarter ended Sept. 30, the company has been adversely affected by the Covid-19 pandemic which continues to cause the intermittent closure of bars and restaurants around the world and has negatively affected on-premise beverage sales. The shift in demand to off-premise, packaged beverages has also strained MCBC’s supply chain and forced it to strategically prioritize certain brands and package types.
MCBC is the issuer of six series of senior unsecured notes and its subsidiary Molson Coors International LP (“MCI”) is the issuer of two series of senior unsecured notes. All senior unsecured notes are guaranteed by certain subsidiaries of MCBC, and the notes issued by MCI are also guaranteed by MCBC itself. MCBC also has an unsecured revolving credit facility which contains a commercial paper program. The credit facility is guaranteed by subsidiaries that guarantee the senior unsecured notes and certain Canadian and UK subsidiaries that meet a revenue or asset threshold. The company reported $225mm outstanding under the commercial paper program as of quarter-end for the 2020 third quarter, but subsequent payments of approximately $125 million leaves a total outstanding of $100 million as of Oct. 29.
In June 2020, MCBC and its lenders amended the credit facility to lower pricing, loosen the financial maintenance covenant requirements and permit additional debt related to the U.K.’s pandemic relief program.
The company’s capital structure as of Sept. 30, adjusted for the commercial paper payment, is as follows:
Liquidity and financial covenant - Liquidity as of Sept. 30, adjusted for the October payment of commercial paper, was $2.13 billion. The credit agreement contains a requirement to maintain a leverage ratio which is currently set at 5.25x; MCBC’s ratio was 3.22x as of September 30.
Debt and liens - We estimate that the company can incur an additional $4.72 billion of debt, $2.97 billion of which can be structurally senior and only $150 million of which can be secured.
Restricted Payments, Investments, Prepayments - None of the company’s debt documents restricted it from paying dividends, making investments or prepayment any currently outstanding debt.
As is customary in investment-grade debt documents, the negative covenants apply to MCBC and all of its subsidiaries; as such, despite there being no restriction on transferring assets, because there is no restricted subsidiary/unrestricted subsidiary distinction, the company is unable to shift assets into entities that are not subject to the limitations in the debt documents.
--Richard Barbour II
Molson Coors Covenants Tear Sheet, Debt Documents Summaries
Molson Coors Covenants Debt Documents
Molson Coors Beverage Co. (“MCBC”), which announced in October 2019 that it was moving its headquarters from Denver, Colo., to Chicago, Ill., was created by the 2005 merger of the Canadian brewer Molson Inc. and the U.S. brewer Adolph Coors Co. It owns a diverse portfolio of global brands such as Blue Moon, Coors Light¸ Miller Genuine Draft and country-specific brands such as Croatia’s Ožujsko and the Czech Staropramen. Continue reading for the Covenants team's analysis of the Molson Coors Beverage covenant and request a trial to access reporting and analysis of hundreds of other stressed, distressed and performing credits.
As MCBC reported in its 10-Q for fiscal quarter ended Sept. 30, the company has been adversely affected by the Covid-19 pandemic which continues to cause the intermittent closure of bars and restaurants around the world and has negatively affected on-premise beverage sales. The shift in demand to off-premise, packaged beverages has also strained MCBC’s supply chain and forced it to strategically prioritize certain brands and package types.
MCBC is the issuer of six series of senior unsecured notes and its subsidiary Molson Coors International LP (“MCI”) is the issuer of two series of senior unsecured notes. All senior unsecured notes are guaranteed by certain subsidiaries of MCBC, and the notes issued by MCI are also guaranteed by MCBC itself. MCBC also has an unsecured revolving credit facility which contains a commercial paper program. The credit facility is guaranteed by subsidiaries that guarantee the senior unsecured notes and certain Canadian and UK subsidiaries that meet a revenue or asset threshold. The company reported $225mm outstanding under the commercial paper program as of quarter-end for the 2020 third quarter, but subsequent payments of approximately $125 million leaves a total outstanding of $100 million as of Oct. 29.
In June 2020, MCBC and its lenders amended the credit facility to lower pricing, loosen the financial maintenance covenant requirements and permit additional debt related to the U.K.’s pandemic relief program.
The company’s capital structure as of Sept. 30, adjusted for the commercial paper payment, is as follows:
Covenant Conclusions
Liquidity and financial covenant - Liquidity as of Sept. 30, adjusted for the October payment of commercial paper, was $2.13 billion. The credit agreement contains a requirement to maintain a leverage ratio which is currently set at 5.25x; MCBC’s ratio was 3.22x as of September 30.
Debt and liens - We estimate that the company can incur an additional $4.72 billion of debt, $2.97 billion of which can be structurally senior and only $150 million of which can be secured.
Restricted Payments, Investments, Prepayments - None of the company’s debt documents restricted it from paying dividends, making investments or prepayment any currently outstanding debt.
As is customary in investment-grade debt documents, the negative covenants apply to MCBC and all of its subsidiaries; as such, despite there being no restriction on transferring assets, because there is no restricted subsidiary/unrestricted subsidiary distinction, the company is unable to shift assets into entities that are not subject to the limitations in the debt documents.
--Richard Barbour II
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