Asahi takes on EUR 7.4 billion loans
That’s an ambitious debt load. Following its purchases of SABMiller’s businesses in western and eastern Europe, Asahi will take on EUR 7.4 billion (USD 7.8 billion) in bank loans to fund the transactions, it was reported on 29 March 2017.
As a result, Asahi’s debt pile will more than double to over five times profits (EBITDA) in 2017. That’s high, or as some would say, very high. By rule of thumb, 2 x EBITDA is considered a comfortable gearing.
Asahi’s gearing is certainly higher than Heineken’s and Carlsberg’s (< 2 x EBITDA) and even Molson Coors’ (4 x EBITDA after their purchase of Miller). Only AB-InBev’s gearing is more pronounced (6 x EBITDA), but then the Brazilians have proven several times over that they can pay down debt quickly.
As AB-InBev’s example shows, it does not matter so much if your debt pile is the size of the Matterhorn; it’s the size of your cash flow that will bring it down.
Asahi’s cash flow currently stands at ten percent of turnover, compared with Heineken’s at 18 percent and AB-InBev’s at 28 percent.
Incidentally, Asahi’s board agreed to the loan from Japan’s Sumitomo Mitsui and Mizuho banks. The money is expected to be taken out in the first half of this year.
