NEW YORK (Standard & Poor's) Feb. 29, 2012--Standard & Poor's Ratings Services today assigned its 'A-' senior unsecured debt rating to Purchase, N.Y.-based PepsiCo Inc.'s (A/Stable/A-1) $2.75 billion senior unsecured notes, consisting of $750 million of notes due in 2015, $1.25 billion of notes due 2022, and $750 million of notes due 2042.
PepsiCo will issue the notes under the company's Rule 415 shelf registration. Our rating on PepsiCo's senior unsecured debt, which is at the holding company, reflects our opinion that this debt is structurally subordinated to priority obligations at its operating entities, which generate substantially all of its cash flow and account for a significant portion of total assets but which do not guarantee this debt. PepsiCo has indicated that it plans to use the net proceeds from this offering for general corporate purposes, including the repayment of commercial paper.
The corporate credit rating on PepsiCo reflects our assessment of the company's business risk profile as "excellent" (as defined in our criteria), reflecting its balanced portfolio of businesses, with its strong positions and well-known brands in the relatively stable, cash-generating liquid refreshment beverage and snack food industries, geographic diversification, and its "intermediate" financial risk profile assessment. We believe PepsiCo's financial policies are aggressive, including its active share repurchase and acquisition program, which have led to higher debt levels.