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Moody’s places CEDC on review for downgrade

Yesterday, Moody’s placed CEDC’s B3 rating on review for downgrade following Russian Standard’s unsolicited offer to acquire a further 19.9% of CEDC in exchange for merging it with Roust, Russian Standard’s spirits distribution operation in Russia. Moody’s main concern is the refinancing of CEDC’s 03/13 convertible bonds, which may be side-tracked by the merger.

In theory, the addition of an extra asset to the benefit of bondholders could be positive, depending on cash flows and structure, yet the deal could also be negative, say if Roust was facing cash flow issues or if it was accompanied by cash or structural leakage away from creditors.