Bloomberg: Greek Exit Costs Hurt Coca-Cola Hellenic Debt: Corporate Finance

Coca-Cola Hellenic Bottling Co. SA (EEEK) bondholders are losing confidence in the firm’s plan to leave Greece on concern the cost of the move will trigger a credit- rating downgrade for the nation’s biggest company.

The extra yield investors demand to own Coca-Cola Hellenic’s most-traded notes over the safest government

debt plunged one percentage point on Oct. 12, the day after the company said it planned to move its headquarters to Switzerland. Since then, the spread on the 4.25 percent bond due 2016 has widened by 0.61 percentage point to 232 basis points.
Enlarge image Greek Exit Costs Hurt Coca-Cola Hellenic Debt

A Greek national flag flies in front of a Coca- Cola Co.-branded store advertising Coca- Cola “Light” in Athens, Greece. Photographer: Kostas Tsironis/Bloomberg
Enlarge image Greek Exit Costs Hurt Coca-Cola Hellenic Debt

The company said Oct. 11 the move is intended “to improve Coca-Cola Hellenic’s access to both the international equity and debt capital markets and increase its flexibility in raising new funds to support its operations and future growth.” Photographer: Kostas Tsironis/Bloomberg

The world’s second-largest Coke bottler says it will get cheaper funding by exiting an economy that has contracted for 17 quarters amid strikes and protests against austerity measures, though the notes have lost almost 60 percent of the gain that followed its announcement of the move. Moody’s Investors Service said Coca-Cola Hellenic may need to borrow a half-billion euros ($640 million), about twice its net income in the first nine months of 2012, jeopardizing its Baa1 rating.

“The change of headquarters is good for the company since it reduces the risk of higher taxes or nationalization, but it deteriorates its liquidity position because of the costs,” said Ramon Nieto, a fund manager at Geroa EPSV Fondos in San Sebastian, Spain. The firm oversees 1.1 billion euros and used to hold Coca-Cola Hellenic’s bonds. “Even with the recent increase in the yield, it’s not attractive enough for us to buy them.”
Notes Surge

Charles O’Brien, a London-based spokesman for Coca-Cola Hellenic at RLM Finsbury, declined to comment on the impact of the bottler’s plans on its credit.

The initial surge in the company’s notes helped make them the best-performing of 123 issues in Bank of America Merrill Lynch’s Euro Consumer Non-Cyclical, Food & Drug Retail, Pharma Index in October, returning 2 percent compared with an average 0.69 percent. The debt has lost 0.05 percent on average this month, one of only two securities in the gauge to post a decline.

Under the plan, a new company called Coca-Cola HBC AG is offering to buy Coca-Cola Hellenic shares on a one-for-one basis. If more than 90 percent of investors agree to the deal, the company can start a buyout of the remaining stock either through a share exchange or cash settlement.

Moody’s estimates it may cost as much as 500 million euros if al