Moody's may drop PepsiCo

Moody's Investors Service said it placed the long-term ratings of PepsiCo (senior at Aa2) and its guaranteed subsidiaries on review for possible downgrade and affirmed the company's Prime-1 short-term ratings following its unsolicited bid for the non-PepsiCo-owned shares of its two largest bottlers, Pepsi Bottling Group and PepsiAmericas for a total of $6 billion in debt and equity.

Simultaneously, the agency said that the ratings of PepsiAmericas at Baa1/P-2 and the long-term ratings of Pepsi Bottling Group at A2 were placed on review for possible upgrade.

Moody's said that PepsiCo's short-term rating of Prime-1 was affirmed, adding that any rating change would be subject to clear signs that the transaction will proceed.

The review will consider the combined strength of the Pepsi System on a fully consolidated basis including additional debt that could equal the $3 billion currently proposed or a different amount depending on the final terms of an agreement, the agency said.

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