Japan Tobacco (JAPTOB; A2/A+) ~$3.4b acquisition of Vector Group

Moody's out late yesterday commenting - all as expected.

• It sees both the 26 and 29s getting pulled. Bond has moved to price some of the $102.875 early call price that co will need to do on the 29s {29s at $101.5, +4.8pts}. It can save ~$11m/yr in interest on 29s if it refi's into it's own curve. It's callable from Feb '25 at $101.4 and par the year after. The 26s are par callable already so CoC put option at 101 has more value (mids at 100.5).
• It is adding caution that this is combustibles heavy co (hence facing volume declines).
• Bullish analyst will see it as a foothold into the US market that JAPTOB can then use to transition/push more non-combustibles growth through.
• We don't see it as expensive enough on 0.5x turns of leverage (particularly given the lack of a takeover premium it seems to have paid) to see this as anything but credit neutral.