The outlook on Diageo's (DEO) long-term issuer default rating, or IDR, was revised to negative from stable on Tuesday by Fitch Ratings, which affirmed the company's current A- rating for both its IDR and senior unsecured debt.

The firm said the outlook change reflects concerns that Diageo's debt levels have risen beyond what it considers appropriate for its current rating and are likely to remain elevated for the next two years.

The revised outlook also takes into account a weak global economic environment, lower consumer confidence, and uncertainty arising from trade tariffs and inflation, all of which could make it harder for Diageo to reduce its debt as quickly as planned, the firm said.

Deleveraging could accelerate if Diageo sells a major part of the business, as management has suggested. However, because the size and timing are still unclear, Fitch said it hasn't factored it into its current forecast, adding that such a transaction could lead to the outlook being raised back to stable.

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