S&P Downgrades Yum Brands Rating By 3 Notches

Standard & Poor's on Thursday downgraded Yum Brands Inc.'s corporate credit rating by three notches to BB from BBB, placing it squarely in junk territory, after the company announced plans to return up to $6.2 billion to shareholders as it gears up to spin off its China business. The move "primarily reflects our expectation of the company's meaningfully higher leverage as it executes on its newly communicated financial policy with a leverage ratio of about 5x, which results in our assessment of its financial risk profile as "highly leveraged"," S&P said in a statement. That compares with its previous financial policy which had adjusted debt-to-EBITDA below 3x, it said. The outlook is stable, meaning S&P is unlikely to adjust the rating again in the near term. Yum shares were down 1% in afternoon trade.