Standard & Poor's Ratings Services said on May 28 it assigned its 'A-2' short-term and commercial paper ratings to U.S. brewer Coors Brewing Co.'s $500 million 4(2) commercial paper program, Reuters reported. Proceeds from issuance on the commercial paper program will be used initially to refinance a portion of the company's pound-denominated existing bank debt. The notes are guaranteed by parent Adolph Coors Co. (Coors) and by certain subsidiaries of Coors. At the same time, Standard & Poor's affirmed its 'BBB+' corporate credit and senior unsecured debt ratings on Golden, Colo.-based Coors, and the 'BBB+' senior unsecured debt ratings on Coors Brewing Company.

"The rating on Adolph Coors Co. reflects its solid positions in the high cash-generating U.S. and U.K. beer markets, the company's international diversification, and its moderate financial policy," said Standard & Poor's credit analyst Nicole Delz Lynch. Somewhat offsetting these factors are the competitive nature of the beer industry and the weakening of Coors' financial profile after its $1.7 billion acquisition of the Carling business (now called Coors Brewers Ltd.--CBL) from Interbrew S.A. in February 2002. The transaction was financed primarily with debt.

Coors' product portfolio includes the No. 3 brand in the U.S. (Coors Light) and the No. 1 brand in the U.K. (Carling). The company has historically been dependent on the U.S. market in general and Coors Light in particular, but the addition of Coors Brewers Ltd. has provided significant geographical diversification. More than 35% of Coors' operating income was generated outside of the U.S. in 2002. In addition, the U.K. and U.S. markets are large and mature, and both Coors and Coors Brewers Ltd.'s preexisting businesses have historically produced stable cash flow. Although Coors has maintained a U.S. market share of about 11%, Anheuser-Busch Inc. and Miller Brewing Co. continue to dominate the U.S. market. As a result, Coors lacks the pricing flexibility and marketing efficiencies of scale enjoyed by its larger competitors. In the U.K., Coors faces significant competition from Scottish & Newcastle PLC and Carlsberg Breweries A/S.

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