While Altria Group’s second impairment charge for its Juul investment is credit negative, it will have minimal financial impact, according to Moody’s Investors Service.
Altria Group recently announced an additional $4.1 billion non-cash impairment charge related to its original $12.8 billion investment in Juul Labs. This follows a previous $4.5 billion impairment charge taken last quarter on the same investment.
The write-down leaves Altria with a $4.2 billion remaining book value for its Juul stake, or 33 percent of its initial minority investment in Juul made just over a year ago.
The impairment is credit negative for Altria because it primarily reflects higher litigation activity at Juul and thus diminished potential to receive cash from the business in the near term, according to Moody’s. “However, the charge is non-cash and does not have a material impact on Altria’s credit profile given we were not expecting Juul to contribute materially to Altria’s earnings and free cash flow over the next 12 [months]–18 months,” Moody’s wrote in a report.
“We view Juul as an ill-timed and disappointing investment, but one that continues to enhance the company’s long-term platform in noncombustible products.”
Source: Moody’s Investors Service