S&P drops Remy Cointreau, notes

Standard & Poor's said it lowered its short- and long-term corporate credit ratings on Remy Cointreau SA to BB+/B from BBB-/A-3.

The outlook is stable.

At the same time, the agency lowered its issue rating on Remy Cointreau's senior unsecured notes to BB+ from BBB- and assigned a 3 recovery rating to the notes.

S&P said the downgrade reflects its view that Remy Cointreau's credit metrics will no longer be consistent with its assessment of its financial risk profile as "modest."

The agency now expects its adjusted debt-to-EBITDA ratio to be between 2 times and 3 times and therefore revised its assessment of the group's financial risk profile downward to "intermediate."

This follows the sharp fall in Remy Cointreau's operating profits because of the structural decrease in the demand for Remy Martin cognac in China. Both fiscal 2014 (ended March 31) and first-quarter fiscal 2015 sales show a slump in demand for cognac in China.

In S&P’s view, this fall is not temporary but rather stems from an abrupt reduction in Chinese consumption of luxury foreign products. Remy Cointreau has been hit particularly hard by this shift, due to its leading position in the upper end of the cognac industry.

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