S&P Says It May Downgrade Yum Brands Into Junk Territory In The Near Term

Standard & Poor's on Tuesday placed ratings of Yum Brands Inc. on CreditWatch negative following the news that the operator of KFC, Taco Bell and Pizza Hut is spinning off its China division. The move means it could downgrade Yum's BBB rating, which is two notches above junk status, in the near term. "We expect that the company's business risk profile could weaken somewhat after separating its fast-growing China business, and its financial risk profile will weaken meaningfully as the company transitions into the non-investment grade credit spectrum, with higher leverage and returning substantial capital to shareholders in conjunction with the transaction," said the rating agency. The review could result in a downgrade of more than two notches, it said.