...Rating Watch Negative: The ratings of British American Tobacco plc (BAT) remain on Rating Watch Negative pending the completion of the agreed proposal by BAT's board to merge with its 42% owned associate Reynolds American Inc. (RAI). Fitch Ratings is likely to downgrade BAT's IDR by two notches on the back of the company's post-merger profile, which will benefit from an enhanced geographic footprint but will be burdened by increased leverage. The process of approvals is proceeding well and the company expects to complete the transaction during the third quarter of 2017. However should the transaction be called off, Fitch would reassess whether this could lead BAT to adopt a more aggressive financial policy or whether its leverage on a standalone basis, which is currently high for the current `A-' rating, could continue its recent steady decline. RAI Deal Increases Leverage: Based on the terms of the proposal, BAT plans to finance the acquisition price of the 57.8% it does not own by offering...
