Wires

TEXT-Fitch:Coca-Cola Hellenic move is limited precedent for now

Share

(The following statement was released by the rating agency)

Oct 12 - Coca-Cola Hellenic's decision to relocate from Greeceto Switzerland, and the recent relocation by fellow Greek corporate FAGE , arelimited precedents for other eurozone corporates for now, despite incentives toreduce share price discounts or protect against the risk of a full-blownsovereign crisis, Fitch Ratings says.

Redomiciling, as opposed to simply seeking listings on foreign exchanges, couldmitigate the impact of a euro exit for issuers with substantial offshoreoperations and cash flow. This is the case for Coca-Cola Hellenic, which hasoperations in 28 countries and is seeking a premium listing in London as well asrelocating to Switzerland, to reflect its international status and improve itsaccess to capital markets.

Reflecting the severity of the crisis in Greece, Coca-Cola Hellenic - which hasin any event been a stand-out case of diversification away from its home market- follows a similar move by FAGE, a much smaller international dairy company.FAGE announced a restructuring to move ultimate ownership of subsidiaries to aLuxembourg parent company.

Outside the highly-stressed situation in Greece, larger blue-chip corporates,especially those with a significant domestic presence, would face strongpolitical resistance as well as the possibility of tax crystallisations and thecomplexity of debt novation. The prospect of creeping forms of taxation in anausterity-inflicted country is not yet a sufficient incentive. Smaller companiesare likely to see limited benefits to their share prices or lending conditions,unless, like FAGE, they can demonstrate that the majority of revenues come fromoutside their home jurisdiction.

We expect peripheral eurozone corporates, in the first instance, to focus onreducing capital expenditure and dividend payments, which can preservestandalone credit profiles by offsetting the impact of a weak economy onrevenues. Divestments, minority stake sales, and diversifying cash holdings awayfrom the domestic banking system, are also popular measures to ensure liquidity.

Relocation of listings and accessing capital through subsidiaries in otherjurisdictions were scenarios that came to the fore in Fitch's 'war game'exercise in August, which identified the likely responses to a hypotheticaleuro-exit crisis and the effectiveness of those responses in disentanglingcorporates from the sovereign risk of their home jurisdictions.

Fitch has also reiterated its fundamentals-driven approach to rating linksbetween eurozone corporate ratings and their respective sovereigns, which leadsto significant levels of independence between ratings actions on each.

Both reports are available from .

((Bangalore Ratings Team, Hotline: +91 80 4135 5898Debanjali.Ghosh@thomsonreuters.com, Group id: BangaloreRatings@thomsonreuters.com, ReutersMessaging: Debanjali.Ghosh.reuters.com@reuters.net))