Pernod to be ‘regular bond issuer,’ maintain investment grade

Pernod Ricard SA, (RI) France’s biggest distiller, said it aims to maintain its newfound investment- grade credit status and will focus on paying down debt and expanding without recourse to acquisitions.

“Investment grade is a priority,” Chief Financial Officer Gilles Bogaert said today in an interview in Paris after Pernod reported first-half profit that beat estimates and raised its annual forecast. “We are a financially disciplined company.”

Standard & Poor’s boosted Pernod’s credit rating one step to BBB-, the lowest investment-grade ranking, in October after Moody’s Investors Service did the same a month earlier, raising the rating to Baa3. Pernod sold $2.5 billion of debt in January, its second dollar-based sale after the upgrade, as it seeks to pay back loans due next year and extend debt maturity.

The maker of Absolut vodka will be a “regular bond issuer,” seeking financing in euros and dollars, Bogaert said. Pernod has increased the amount of debt it has in bonds compared with loans. Conditions are “very good” for selling bonds, even though the company “needs to pick the right windows,” he said.

Pernod isn’t “targeting to be a single-A company,” Bogaert said. “That is not a strategic objective.”

Pernod, which said today it had debt of 9.4 billion euros ($12.3 billion) at the end of 2011, expects net debt to fall to 3.9 times adjusted earnings before interest, taxation, depreciation and amortization at the end of its financial year in June, compared with 4.4 times 12 months earlier.
Refinancing Need

About 77 percent of Pernod’s borrowings are in bonds, though it intends to keep a proportion of bank debt. European banks’ loan capacity has shrunk, especially for debt in dollars, Bogaert said. The company aims for a new syndicated loan with banks “in the near future,” he said. The Paris-based company needs to refinance 1.5 billion euros of bank debt before 2013.

Bogaert said Pernod is “open to some tactical moves if there’s an opportunity” for acquisitions, although the company doesn’t have “strategic holes.”

“Don’t expect anything massive today” in terms of mergers and acquisitions, he said. “We are focused on organic growth.”

He declined to comment on whether the company may be considering a bid for all or part of Beam Inc.’s (BEAM) liquor brands.