Fitch cuts Remy, debt

Fitch Ratings said it downgraded Remy Cointreau SA's long-term issuer default rating and senior unsecured ratings to BB+ from BBB-.

The outlook is stable.

The downgrade reflects the significant drop in Remy's fiscal year 2014 operating profit, the persisting uncertainty about the evolution of demand of high-end cognac in China, the pressure on operating profit from advertising and promotion investments in the company's other unit of Liqueurs and Spirits and Fitch's consequent expectation that leverage will remain above the threshold compatible with a BBB- issuer default rating.

While the shock in the Chinese cognac market materialized broadly in line with Fitch's assumptions for retaining a BBB- rating, the 2013 share buyback and higher cash taxes further affected credit metrics. However, Fitch said the stable outlook reflects the expectation that Remy's leverage should improve in fiscal year 2015.

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