Johannesburg, November 07, 2014 -- Moody's Investors Service has today affirmed The Bidvest Group Limited's
(Bidvest) national scale long- and short-term issuer ratings
at A1.za and P-1.za, respectively, despite
the weakening of the South African government's credit profile,
as reflected by Moody's downgrade of South Africa's government bond rating
to Baa2 (stable) from Baa1 (negative) on 6 November 2014. The outlook
on the ratings for Bidvest remain stable.
For additional information, please refer to the related announcement:
https://www.moodys.com/research/--PR_312007
RATINGS RATIONALE
"Today's affirmation primarily reflects Bidvest's strong
operational and financial profile as well as diversified operational exposures
outside of South Africa, which reduces its exposure to and reliance
on the South African economy", says Dion Bate, a Vice
President -- Senor Analyst at Moody's and lead analyst for Bidvest.
Bidvest's strong standalone business profile is underpinned by its
diversified sources of revenues across a wide range of businesses and
geographies. For the year end to 30 June 2014, approximately
34% of its consolidated earnings before interest, tax,
depreciation and amortization (EBITDA) was generated outside of South
Africa. Furthermore, given Bidvest's international
footprint and decentralized operating model it has a track record of good
access to global funding sources.
The affirmation also factors in Bidvest's stable credit profile
with a history of low leverage (i.e., adjusted gross
debt/EBITDA of 2.4x as at 30 June 2014), which is supported
by its conservative financial policies and robust liquidity profile,
with available cash of ZAR8.5 billion ($0.8 billion)
and available committed credit facilities of ZAR10.6 billion ($1.0
billion).
LIQUIDITY
Bidvest's remaining debt maturities and other cash demands, including
capital expenditure, working capital requirements and dividend payments
are sufficiently covered by (1) growing operating cash flow generation
of approximately ZAR8 billion; (2) existing cash and cash equivalents
balances of ZAR8.5 billion for the 2014 fiscal year ended 30 June;
and (3) unutilized 360-day committed lines of approximately ZAR10.6
billion.
Bidvest's reliance on its ZAR13.8 billion (ZAR3.2 billion
drawn) 360-day evergreen facilities and its ZAR2.4 billion
undrawn commercial paper facility issued under its domestic medium-term
note programme poses an element of refinancing risk over the short term.
Moody's will continue to closely monitor Bidvest's strategy relating to
refinancing and the lengthening debt maturity profile of its interest
bearing debt. Post June 2014 we note that Bidvest converted ZAR2.2
billion of its evergreen facilities into a 5 year term facility and an
early refinancing of a ZAR1.5 billion bond maturing in 2015.
RATIONALE FOR STABLE OUTLOOK
The stable outlook reflects Moody's expectations that Bidvest will continue
to maintain its positioning as a leader in freight operations, foodservice
products distribution, industrial and commercial products,
and outsourcing services. Moody's expects that Bidvest will maintain
adequate debt and cash flow metrics in the short to medium term through
prudent balance sheet, liquidity and risk management practices.
These expectations are based on Bidvest's leverage, as measured
by (1) retained cash flow/gross debt, remaining at least in the
high 20% range; and (2) debt/EBITDA remaining in the 2.0x-2.4x
range. All metrics are according to Moody's standard adjustments
and definitions.
WHAT COULD CHANGE THE RATING - UP
Moody's would consider an upgrade if one or a combination of the following
occurs (1) Bidvest maintains a retained cash flow to net debt metric in
the upper 30% range on a sustainable basis; (2) adjusted leverage,
as measured by gross debt to EBITDA, is maintained solidly under
2.0x; (3) debt protection levels improve such that earnings
before interest, tax and amortization (EBITA) to interest expense
is solidly above 5.0x; (4) the company demonstrates an ability
to generate and maintain solid positive free cash flow; and (5) the
company maintains stable and improved operating margins.
WHAT COULD CHANGE THE RATING - DOWN
Moody's would consider a downgrade if one or a combination of the following
occurs (1) retained cash flow/net debt falls into the 20%-24%
range on a sustainable basis; (2) adjusted leverage, as measured
by debt/EBITDA, trends toward 3.0x; (3) erosion in operating
performance due to a sustainable deterioration in operating margins results
in lower debt protection measures such that EBITA/interest expense remains
sustainably in the 4.0x-4.4x range; and (4)
financial policies are not adjusted, in the event that debt protection
measures remain weak, in order to ensure that the company generates
positive free cash flow on a sustained basis through conservative capital
expenditure spend and adjusted shareholder remuneration policies resulting
in a strengthening of the metrics.
Founded in 1988 and based in Johannesburg, South Africa, Bidvest
is a service, trading and distribution company with operations in
Southern Africa, Europe, Asia Pacific, Latin America
and the Middle East. Its businesses operate within four divisions:
Bidvest Foodservice, Bidvest South Africa, Bidvest Namibia
(fishing, freight, food and industrial/ commercial services)
and Bidvest Corporate (properties and corporate services). Furthermore,
the Bidvest South Africa division is split into 11 segments with activities
covering: outsourced and freight services; automotive retailing;
financial services; commercial and industrial products; and
travel. For the financial year ended (FYE) 30 June 2014,
the Group reported revenue of ZAR183.6 billion (US$17.3
billion) and adjusted EBITDA of ZAR12.8 billion (US$1.2
billion) with adjusted total assets of ZAR93.5 billion (US$8.8
billion).
The Bidvest Group Limited's ratings were assigned by evaluating
factors that Moody's considers relevant to the credit profile of the issuer,
such as the company's (1) business risk and competitive position compared
with others within the industry; (2) capital structure and financial
risk; (3) projected performance over the near to intermediate term;
and (4) management's track record and tolerance for risk. Moody's
compared these attributes against other issuers both within and outside
The Bidvest Group Limited's core industry and believes The Bidvest
Group Limited's ratings are comparable to those of other issuers
with similar credit risk.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn"
country modifier signifying the relevant country, as in ".za"
for South Africa. For further information on Moody's approach to
national scale credit ratings, please refer to Moody's Credit rating
Methodology published in June 2014 entitled "Mapping Moody's National
Scale Ratings to Global Scale Ratings".
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain 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 certain 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 certain 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.
For any affected securities or rated entities receiving direct credit
support from the primary entity(ies) of this rating action, and
whose ratings may change as a result of this rating action, the
associated regulatory disclosures will be those of the guarantor entity.
Exceptions to this approach exist for the following disclosures,
if applicable to jurisdiction: Ancillary Services, Disclosure
to rated entity, Disclosure from rated entity.
The rating has been disclosed to the rated entity or its designated agent(s)
and issued with no amendment resulting from that disclosure.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Glossary: this press release contains within the main body of the
text definitions of any defined terms or acronyms used within it.
Moody's various ratings symbols, rating scales and other ratings-related
definitions can be found in the MIS Rating Symbols and Definitions guide
at www.moodys.com.
1. No part of this rating action was influenced by any other business
activities of Moody's Corporation- i.e. this rating
action was not affected by the existence of, or potential for,
other business relationships between Moody's Investors Services or its
affiliates and the Rated Entity or its affiliates, or the non-existence
of any such relationships.
2. This rating action was based solely on the merits of the obligor(s)
or instrument(s) being rated.
3. This rating action was an independent evaluation of the risks
and merits of the obligor(s) or instrument(s) assessed in this rating
action and is subject to the potential limitations of the credit rating
disclosed with this rating action.
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.
Please see the ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Dion Bate
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service South Africa (Pty) Ltd.
The Forum
2 Maude Street
2196 Sandton
Johannesburg
South Africa
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
David Staples
MD - Corporate Finance
Corporate Finance Group
Telephone: 00971 4237 9536
Releasing Office:
Moody's Investors Service South Africa (Pty) Ltd.
The Forum
2 Maude Street
2196 Sandton
Johannesburg
South Africa
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's affirms Bidvest's rating at A1.za, outlook stable
