London, 27 January 2012 -- Moody's Investors Service ("Moody's") has today
lowered to B3 from B2 the corporate family rating (CFR) of Europcar Groupe
S.A. ("Europcar" or "the company").
Concurrently, Moody's has downgraded EC Finance Plc's
Senior Secured Notes to B3, and Europcar Groupe S.A's
Senior Subordinated Secured Floating Rate Notes ("FRNs") to
Caa1 and Senior Subordinated Unsecured Notes to Caa2. The outlook
on all these ratings is stable.
RATINGS RATIONALE
"The downgrade of Europcar's CFR to B3 reflects Moody's
developing concerns over the group's liquidity profile in light
of the significant refinancing requirements over the next 18 months,
combined with expectations of continued high leverage in the context of
a challenging economic environment", says Sebastien Cieniewski,
lead analyst for Europcar.
Europcar's refinancing needs over the coming quarters include the
GBP545 million UK Fleet Financing Facility maturing in December 2012,
the €350 million Senior Revolving Facility ("RCF") maturing
in May 2013, and the €425 million FRNs due in May 2013.
In Moody's view, the refinancing of the FRNs issued by the
holding company Europcar Groupe S.A., will be particularly
challenging if market conditions do not improve. Moody's
considers the FRNs to be junior in the capital structure with a significant
amount of debt ranking ahead including: (i) the UK and other fleet
financing facilities, of which €500 million was drawn at the
end of September 2011 and, (ii) the €350 million Revolving
Credit Facility due 2013. Additionally, part of the fleet
operated in France, Germany, Italy and Spain is financed through
a dedicated asset based financing structure, made of (i) the securitized
€1,300 million Senior Asset Revolving Credit Facility due in
2014, of which €792 million was drawn at the end of September
2011, and (ii) the €350 million senior secured notes at the
level of EC Finance Plc. This dedicated structure is mainly secured
by the financed fleet and the related receivables. Europcar's
adjusted debt to EBITDA stood at 4.9x as of FY2010 with no expectations
for improvement in FY2011.
In the first nine months of FY2011, Europcar generated stable unaudited
revenues of €1,526 million when compared to the same period
last year. Despite a worsening economic environment, operating
performance also remained relatively stable. The decrease in rental
day volume by 0.8% in the first nine months of FY2011 was
offset by an increase in the average revenue per day by 0.9%
as reported by the company. At the same time we note that fleet
holding costs have increased by 2.2% whilst the utilisation
rate improved at around 75% versus the prior year (74%).
The stable outlook assumes that the UK Fleet Financing Facility will be
successfully refinanced.
Negative pressure could develop if the company fails to announce in the
near-term measures to refinance its 2013 debt maturities;
or if operating performance deteriorates with adjusted leverage trending
towards 5.5x; or EBIT/Interest coverage is below 1.0x
on a sustained basis.
Positive pressure could arise if the refinancing needs are met successfully;
or if shareholders show significant support. Moody's would
also expect EBIT/Interest coverage to exceed 1.0x and adjusted
leverage sustained comfortably below 5.0x with a solid liquidity
profile.
The principal methodology used in rating Europcar was the Global Equipment
and Automobile Rental Industry Methodology published in December 2010.
Other methodologies used include Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009. Please see the Credit Policy page
on www.moodys.com for a copy of these methodologies.
Headquartered in Paris, France, Europcar is a leading European
provider of short- to medium-term rentals of passenger vehicles
and light trucks to corporate, leisure and replacement clients.
Europcar is owned by Eurazeo, one of the largest European investment
companies.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides relevant regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt or pursuant to a program for which the ratings
are derived exclusively from existing ratings in accordance with Moody's
rating practices. For ratings issued on a support provider,
this announcement provides relevant regulatory disclosures in relation
to the rating action on the support provider and in relation to each particular
rating action for securities that derive their credit ratings from the
support provider's credit rating. For provisional ratings,
this announcement provides relevant regulatory disclosures in relation
to the provisional rating assigned, and in relation to a definitive
rating that may be assigned subsequent to the final issuance of the debt,
in each case where the transaction structure and terms have not changed
prior to the assignment of the definitive rating in a manner that would
have affected the rating. For further information please see the
ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Information sources used to prepare the rating are the following :
parties involved in the ratings, and confidential and proprietary
Moody's Investors Service information.
Moody's considers the quality of information available on the rated
entity, obligation or credit satisfactory for the purposes of issuing
a rating.
Moody's adopts all necessary measures so that the information it
uses in assigning a rating is of sufficient quality and from sources Moody's
considers to be reliable including, when appropriate, independent
third-party sources. However, Moody's is not
an auditor and cannot in every instance independently verify or validate
information received in the rating process.
Europcar International S.A.S.U. has received
a Rating Assessment Service within the last two years preceding the Credit
Rating Action.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
two years preceding the credit rating action. Please see the special
report "Ancillary or other permissible services provided to entities
rated by MIS's EU credit rating agencies" on the ratings disclosure
page on our website www.moodys.com for further information.
Please see the ratings disclosure page on www.moodys.com
for general disclosure on potential conflicts of interests.
Please see the ratings disclosure page on www.moodys.com
for information on (A) MCO's major shareholders (above 5%) and
for (B) further information regarding certain affiliations that may exist
between directors of MCO and rated entities as well as (C) the names of
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of each rating category and the definition of default and recovery.
Please see ratings tab on the issuer/entity page on www.moodys.com
for the last rating action and the rating history.
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Please see www.moodys.com for any updates on changes to
the lead rating analyst and to the Moody's legal entity that has issued
the rating.
Sebastien Cieniewski
Analyst
Corporate Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Chetan Modi
Senior Vice President
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Ltd.
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Moody's downgrades Europcar Groupe S.A. to B3 from B2; outlook stable
