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London Calling: CCH shift reflects international status – Fitch

16-Oct-2012

Coca-Cola Hellenic’s move to list its shares in London rather than Athens reflects a desire to avoid a ‘full blown’ sovereign crisis but also boost its international profile.

That’s according to prominent New York/London ratings agency Fitch, which wrote that ‘redomiciling’ (rather than simply seeking listings abroad) could ease the impact on CCH (which is Coke’s second-largest bottler) of Greece leaving the euro.

“This is the case for Coca-Cola Hellenic, which has operations in 28 countries and is seeking a premium listing in London as well as relocating to Switzerland, to reflect its international status and improve its access to capital markets," Fitch said in a statement last Friday.

Standout case of diversification

Despite noting that CCH’s move reflected how serious events were in France, Fitch said Greece only accounted for 5% of its earnings across 28 countries, with the firm a “standout case of diversification away from its home market”

CCH’s share price promptly rose 7% to €16.75 when CEO Dimitris Lois announced his firm’s Greek exit last Thursday; Fitch rival Standard & Poor’s (S&P’s) had downgraded the firm’s short-term credit rating to BBB+/A-2 in July.

This downgrade partly reflected S&P’s assessment of greater political and economic pressures in Greece and a then 1 in 3 chance of a Eurozone exit (with potential negative consequences for CCH) a possibility now being discussed more openly.

Strong political resistance

Beyond the stress Greece was currently enduring, Fitch said that larger blue chips (especially those with a significant local presence) would face strong political resistance to any move, as well as tax crystallisations and debt novation (substitution of new for old debt).

“The prospect of creeping forms of taxation in an austerity-inflicted country is not yet a sufficient incentive,” Fitch said.

Meanwhile, smaller firms were unlikely to see limited benefits regarding share price or lending conditions, unless (like Greek dairy company FAGE, which has also announced plans to move its domicile status and HQ from Athens to Luxembourg this month), the majority of revenues came from abroad.

“We expect peripheral Eurozone corporates, in the first instance, to focus on reducing capital expenditure and dividend payments, which can preserve standalone credit profiles by offsetting the impact of a weak economy on revenues," Fitch said.

“Divestments, minority stake sales, and diversifying cash holdings away from the banking system, are also popular measures to ensure liquidity,” the firm added.

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