...Downgrade Upon RAI Merger: Following completion of the merger between British American Tobacco plc's (BAT) and its 42%-owned associate Reynolds American Inc. (RAI) in July 2017, Fitch downgraded BAT's IDR to `BBB'. BAT now benefits from an enhanced geographic footprint, access to cash flows in different currencies, stronger scope to pursue its Next Generation Products strategy and further opportunities to improve its profit margins thanks to merger synergies. The transaction makes it the largest tobacco company globally. However, it will be burdened by increased leverage, which may remain high and not consistent with `BBB' category rating medians over the rating horizon. RAI and BAT Rating Equalisation: Fitch has analysed parent and subsidiary links between BAT and RAI following their merger and concluded that they are sufficiently strong to equalise the IDR for both entities at BAT's IDR of `BBB'. BAT has provided a senior unsecured guarantee to RAI's bonds and RAI has established a guarantee...
