...Stretched Balance Sheets: Leverage is at the upper end of the rating range for The Coca- Cola Company, PepsiCo Inc., and Coca-Cola Enterprises as companies increase gross debt and prioritize shareholder returns to offset softer-than-expected profit growth with debt-funded repurchases, increased dividends and M&A. Fitch Ratings expects that a further focus on shareholder returns and a lack of meaningful deleveraging could lead to negative rating actions. Financial Policy at Forefront: Consequently, Fitch believes the increased leverage could begin to weigh more on financial policy decisions regarding future shareholder return targets in 2016 if issuers want to preserve current ratings. With significant foreign cash generation, Coca- Cola and PepsiCo have material foreign cash balances due to a reluctance to repatriate earnings. These issuers have borrowed to fund domestic activity (primarily shareholder-related outflows) causing higher gross leverage domestically relative to consolidated...
