Anheuser-Busch InBev refinances more acquisition debt
Bit by bit, Anheuser-Busch InBev is successfully refinancing the roughly $45 billion in debt it took on in November. The debt, of course, was needed to buy St. Louis brewer Anheuser-Busch for $52 billion.
Today, A-B InBev sold $944 million of 5-year notes – five times as much as it planned to sell a week ago — at an interest rate of 6.57 percent. Three weeks ago, it raised about $5 billion in the bond market, and in late November it raised $8 billion by selling new shares. It also has raised money from the sale of some assets, such as part of A-B’s stake in Tsingtao. Stock-market investors treated today’s supersized note offering as tood news: A-B InBev shares jumped 8 percent in European trading today.
At today’s closing price of 21.32 euros, the shares have nearly doubled from the low they registered on Nov. 24, the day the $8 billion stock offering was announced.
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David Nicklaus has covered St. Louis business for more than 25 years. His column appears three days a week on the Post-Dispatch business page. 
Borrow $54 billion. Borrow billions more to help pay off the $54 billion loan. Get other investors to help pay off loan. Sell off some of your most lucrative divisions. Don’t pay your suppliers and advertisers for 4 months. It sounds like their business is skating on rather thin ice. Did they foresee the recession we are in the midst of?
InBev just forced all their contractors to take a 10% rate cut with no negotiations. For those interested I have spoken to a lawyer and it invalidates the contracts we signed with our companies. We are free to look and talk to other consulting companies now from the way I understand it.
bluenote, becareful… it’s tough out there… I’ve been off since mid-December… My salary requirements are currently 12.5% less then I was making on contract to A-B… As a contractor, you were never locked in to A-B, just 2 weeks notice to your contracting firm. If you are current employed, count your lucky stars!
Bluenote, I believe you’re right. The 10% bill rate reduction is something that ABIB is forcing the contracting firms to take. It is up to the individual firms how much of that, if any, they’re going to pass along to the contractors. I’m supposed to have a meeting with my firm today to find out how this affects me. If they tell me I’m taking a pay cut, I’m going to ask the pertinent question, “What if I say no?” If they tell me I’m not taking a pay cut, I’m going to recommend to some of my friends that they transfer their contracts to my firm, because I know several who have already been informed they’re getting paycuts.
Other large companies in St Louis (Mastercard and Monsanto to name two) have done the same thing with their contractors. To be honest, I think the economy is more of an excuse than a real reason. Since everyone is doing the same it only makes smart business sense to do it too I guess. As Blue pointed out though they better make sure they read the fine print before they do…
InBev is feeling the pinch of the higher Dollar verses the Euro compared to when the deal was made. They have a lot of extra debt on their hands now simply because of currency flucuations.
Tim–I don’t think you’re analyzing the currency situation properly. For one, they have a giant stream of cash flows coming in dollars from A-B that they can use to pay down the debt and the interest on it. Secondly, if they wanted to fund some of the debt with Euros or other foreign currencies (and not dollars) they would have entered into currency swaps that effectively make the debt be denominated in a foreign currency.
InBev expected a rise in the dollar; they said so when they completed the deal. This is a good thing for them unless the former A-B falls off a cliff.
Looks like “Senor Burrito”is up to his eyeballs in Salsa. Maybe in a year or so,Busch can buy the whole place back for the four hundred million plus he got for his part of the deal,ya think?
cjstl- you obviously have no idea what you are talking about. Consider a 10% rate on a bill rate of $75. You are talking about a 14,100. difference. Just how much doyou think a consulting company makes on you? Try around 10K- so how could the consulting company not adjust compensation to the contractor. Are you assumeing that they should lose monwy after overhead and paying the banks interest on borrowing your payroll for 134 days- what are you, in kindergarten or did youjust not get a college educcation. Grow- up idiot or else get informed. LOL- you are hysterical.