OREANDA-NEWS. Fitch Ratings has assigned an 'A+' rating to The Coca-Cola Company's (Coca-Cola) multi-tranche issuance of Euro senior notes including EUR2 billion floating rate notes due 2017, EUR2 billion floating rate notes due 2019, EUR1.5 billion 0.75% senior notes due 2023, EUR1.5 billion 1.125% senior notes due 2027 and EUR1.5 billion 1.625% senior notes due 2035. The Rating Outlook is Negative. Coca-Cola had approximately \$41.7 billion of debt as of Dec. 31, 2014. A complete list of ratings follows at the end of this release.

The notes will be issued by Coca-Cola and will rank equally with the company's senior unsecured obligations. Coca-Cola will use the net proceeds from the offering to fund the repayment or redemption of the company's 5.350% notes due 2017, 4.875% notes due 2019 and 0.750% notes due March 13, 2015, including related fees, expenses and redemption premiums and to repay commercial paper. Coca-Cola may also use a portion of the proceeds for general corporate purposes, which may include working capital, capital expenditures, acquisitions of or investments in businesses or assets, redemption and repayment of short-term or long-term borrowings and common stock purchases.

KEY RATING DRIVERS

Strong Global Brands
Coca-Cola ratings are supported by its position as the world's largest global beverage company and the value of the Coca-Cola brand. Coca-Cola has 20 \$1 billion brands, including: Coca-Cola, Diet Coke, Sprite, Powerade, Minute Maid, Fanta Orange, Schweppes and Dasani. Given the prominence of carbonated soft drinks (CSDs) in Coca-Cola's beverage portfolio, the ratings consider the multiyear decline in CSD volumes in the U.S., continued concern over artificial sweeteners affecting diet CSD demand in North America, and modest CSD growth in other developed countries. However, this risk is mitigated by Coca-Cola's market strength in developing geographies with greater long-term growth characteristics driven by low per capita consumption characteristics and expanding middle class that should provide an important longer-term offset.

Innovation and mergers and acquisitions (M&A) will continue to play pivotal roles for non-alcoholic beverage companies including Coca-Cola to evolve their product portfolios beyond CSDs and adapt to changing consumer behavior. Diet CSD declines in the U.S. are in the mid- to high single-digit range as perceptions toward artificial sweeteners, fueled by social media attacks, remain highly negative. U.S. diet volume trends are also inherently more volatile given the relatively narrow drinker base.

As the shift in consumer attitude has become more centered on health and wellness, companies are targeting new beverages that are fresh, natural, minimally processed, and have a shorter ingredient list with flavorful taste profile. Whether beverage innovation brings back lapsed consumers to the CSD category given the plethora of alternative choices is a key that Fitch believes could prove challenging and provides a greater urgency to have a well-rounded beverage portfolio. Fitch does expect regular CSD retail trends to remain stable in North America though in 2015, buoyed by positive price/pack mix, marketing investments and an improving U.S. economy.

Debt Structure, Elevated Leverage
Fitch remains concerned with Coca-Cola's high gross leverage that has been elevated by substantial commercial paper (CP) balances. Coca-Cola's gross leverage is weak for the rating category at 3.2x on a total debt-to-operating EBITDA basis for 2014, up from 2.8x at the end of 2013. Over the longer term as Coca-Cola progresses on North American refranchising, Fitch expects net proceeds will be used for debt reduction.

For U.S. issuers, Fitch currently excludes foreign cash balances from its definition of readily available cash used to calculate net leverage metrics. Fitch recognizes that these cash balances are an asset that may be accessed and used to reduce debt in the event it is necessary. For certain issuers with significant levels of foreign cash balances which includes Coca-Cola, Fitch will use supplemental adjusted net leverage ratios when gauging the level of tolerance/cushion within assigned ratings. The supplemental adjusted EBITDA net leverage at the end of 2014 was 2.3x compared to 2.0x at the end of 2013.

Coca-Cola's CP balance remains substantial at \$19.1 billion as of Dec. 31, 2014. With total debt at \$41.7 billion, the CP mix was approximately 45% of the firm's overall capital structure which Fitch believes increases Coca-Cola's financial risk. Coca-Cola has indicated that \$20 billion is the upper limit for its CP program. A portion of the net proceeds will be used to repay CP.

The growth in CP balances results from Coca-Cola's mismatch between its U.S. cash outflows and its significant international cash inflows which the company has not felt a need to repatriate at this time. Coca-Cola maintains a comparable cash balance along with its committed bank lines to provide backup to its CP borrowings. Fitch believes Coca-Cola should advance a longer-term plan to address the structural mismatch and the large CP balance including any reduction in cash matching any corresponding reduction in CP levels, thus lowering gross debt.

Strong Cash Generation, Liquidity
Coca-Cola's ratings reflect the company's ability to consistently generate considerable cash flow from operations (CFFO) and free cash flow (FCF). For 2014, Coca-Cola generated \$10.6 billion and \$2.9 billion (after adjusting for dividends) of CFFO and FCF, respectively, after generating \$10.5 billion and \$2.9 billion for the year-ended Dec. 31, 2013. Latest 12 months (LTM) dividends were \$5.1 billion. Coca-Cola's long-term debt maturing in the next 12 months was \$3.6 billion.

As of Dec. 31, 2014, Coca-Cola's \$28 billion liquidity position consisted of \$18 billion of cash and short-term investments, \$3.7 billion of marketable securities, and \$6.3 billion of availability under its committed credit lines and revolving credit facility that mature August 2019. Of the cash, short-term investments and marketable securities, \$19.5 billion was held by foreign subsidiaries.

Operating Performance
Coca-Cola has demonstrated relatively good resiliency in the past with top-line and cash flow growth driven by increasing volume, price/mix and improved operating expense leverage. Persistent global macroeconomic pressure, foreign exchange movements, higher taxes, negative perceptions of artificial sweeteners and weather-related issues has made past volume growth and operating performance more challenging. During 2014, consolidated net operating revenue excluding the negative effects of currency and structural changes grew 3% with concentrate volumes rising 1% and price/mix contributing 1%. Operating income increased 6% excluding the impacts of currency and structural changes. With the macro-environment headwinds, Coca-Cola's operating performance was slightly lower than Fitch's expectations. Coca-Cola's expanded productivity savings program should enable additional financial flexibility to cover incremental investments and costs that will be primarily redirected for increased media investments and brand support development.

M&A Investments
The ratings also consider the potential for future acquisitions given the company's transaction history. Fitch views Coca-Cola's investments in minority positions of Monster Beverage and Keurig Green Mountain, Inc. as relatively low risk and having key strategic benefits of improving product diversification and distribution. The shifting secular trends within the soft drink industry make these investments essential to create an additional avenue for growth.

KEY ASSUMPTIONS

--Coca-Cola limits CP program to \$20 billion with foreign cash providing a meaningful offset to CP balances;
--Coca-Cola continues to borrow debt to fund domestic cash requirements;
--Modest global volume growth in the low single digits;
--Net share repurchases of \$2.5 billion for 2015;
--Capital spending of \$2.8 billion for 2015;
--FCF of at least \$2.5 billion for 2015.

Coca-Cola Refreshments USA, Inc. (CCR) Ratings
Fitch does not make a rating distinction between Coca-Cola Company and CCR issued obligations, since default risk is very low at this level on the rating scale. CCR's notes are structurally superior to the notes issued by Coca-Cola.

RATINGS SENSITIVITIES

Positive: Future developments that may, individually or collectively, result in the affirmation of ratings with a Stable Outlook include:

Coco-Cola develops an appropriate longer-term plan to reduce aggregate debt balances including CP in a sensible manner.

Negative: Future developments that may, individually or collectively, lead to negative rating include:

Coca-Cola's ratings would be negatively affected by a large debt-financed acquisition or share repurchase program, a reduction in cash and cash equivalents without a commensurate reduction in CP balances and/or the lack of a plan to reduce gross leverage over the longer term.

In addition, further negative pressure from increased declines with CSD volumes in the U.S., greater than expected volatility in emerging market regions, aggressive excise taxes increases in multiple regions, shift in focus from pricing to volume and margin erosion from channel mix shifts could also affect ratings.


Fitch currently rates The Coca-Cola Company (Coca-Cola) and its subsidiaries as follows:

The Coca-Cola Company
--Long-term Issuer Default Rating (IDR) at 'A+';
--Bank credit facilities at 'A+';
--Senior unsecured debt at 'A+';
--Short-term IDR at 'F1';
--Commercial paper (CP) at 'F1'.

Coca-Cola Refreshments USA, Inc. and Coca-Cola Refreshments Canada, Ltd. (CCR)
--Long-term IDR at 'A+';
--Senior unsecured debt at 'A+';
--Senior shelf at 'A+'.

The Rating Outlook is Negative.