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Rating Action:

Moody's affirms Brink's CFR at Ba1, Sr. Unsecured notes at Ba2; outlook revised to stable

26 Oct 2018

$600 million of rated debt

New York, October 26, 2018 -- Moody's Investors Service ("Moody's") affirmed The Brink's Company's ("Brink's") Ba1 Corporate Family rating ("CFR"), Ba1-PD Probability of Default rating ("PDR"), Ba2 senior unsecured and SGL-2 Speculative Grade Liquidity ratings. The ratings outlook was revised to stable from negative.

RATINGS RATIONALE

"Although Brink's will likely incur additional debt to fund acquisitions, Moody's expects sustained growth in profit rates and free cash flow, driven by new products and multi-faceted cost reduction initiatives, especially in its relatively-low profit but large North American operations, leading to the revision of the outlook to stable from negative" said Edmond DeForest, Moody's Senior Credit Officer.

The Ba1 CFR reflects Brink's market leadership across a number of security related services, its geographic diversification and Moody's expectations for mid-single-digit percent organic revenue growth (before currency translation impacts) and debt to EBITDA of around 3 times. Brink's operating performance has showed substantial improvements since 2016, although the company has also incurred debt to fund acquisitions and generates modest free cash flow compared to other Ba1-rated services companies. EBITA margins are expected to expand to 11% to 13% in 2019, up from about 10% in 2018 and substantially from less than 6% in 2015, driven by higher-profit new products, ongoing expense management initiatives and lower operating costs enabled by efficiency-oriented investments, including single-driver vehicles. However, expenses associated with anticipated debt-financed acquisitions, including transaction fees and integration costs, and elevated capital expenditures in growth and efficiency investments will continue to pressure and limit free cash flow.

International operations account for the majority of revenues and preponderance of profits, notably in volatile markets including Mexico, Argentina and Brazil, but the company's debt is denominated in US dollars.

Revenue growth could be limited by volume and pricing pressure and currency translation impacts. Additional factors pressuring volumes and profitability include the growth of non-cash payment methods, volatile retail expenditures and diamond and jewelry shipments, structural cost issues (pensions) and pricing pressure given a challenging banking industry environment.

All financial metrics cited reflect Moody's standard analytical adjustments.

The SGL-2 liquidity rating reflects Moody's assessment of Brink's overall liquidity as good. Although Moody's expects for only modest free cash flow in the next year, the company has over $200 million of cash in excess of the amounts needed to close already-announced acquisitions and about $25 million of annual required term debt amortization. Moody's anticipates around $600 million available under the $1 billion senior secured revolving credit facility (unrated). The company must comply with financial covenants applicable to its secured indebtedness, including maximum net leverage and minimum interest coverage tests (as defined in the secured facility agreement); Moody's expects Brink's will comfortably comply with the tests over the next year.

The Ba2 senior unsecured rating reflects the Ba1-PD PDR and a loss given default assessment of LGD5, reflecting effective subordination to all the secured debt, including the $1 billion revolver and $475 million of term loans (unrated) outstanding as of September 30, 2018. The senior notes are guaranteed by substantially all of the domestic subsidiaries of the company.

The stable ratings outlook reflects Moody's anticipation for profit rate expansion, free cash flow growth and debt to EBITDA around 3 times. The stable outlook also incorporates expectations for further debt-financed acquisitions.

Higher ratings are possible if an extended improvement in financial performance through consistent revenue and earnings growth and material free cash flow generation becomes adequate to fund Brink's acquisition and growth investments while it maintains additional financial flexibility from a lower proportion of secured debt to total debt. Moody's could upgrade the ratings if it anticipates Brink's will sustain: 1) debt to EBITDA below 2.5 times; 2) EBITA to interest expense above 4 times; 3) free cash flow to debt exceeding 10%; and 4) balanced financial policies.

A downgrade of the ratings is possible if Moody's anticipates: 1) debt to EBITDA sustained above 3.5 times; 2) declines in EBITA margins; 3) weak or no free cash flow growth; or 4) more aggressive financial policies, including the use of debt proceeds to increase shareholder returns.

..Issuer: Brink's Company (The)

.... Corporate Family Rating, Affirmed at Ba1

.... Probability of Default Rating, Affirmed at Ba1-PD

....Senior Unsecured Notes, Affirmed at Ba2 (LGD5)

.... Speculative Grade Liquidity Rating, Affirmed at SGL-2

....Outlook, Changed To Stable From Negative

The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Brink's, headquartered in Richmond, Virginia, provides security-related services globally, including cash-in-transit, secure transportation of valuables, ATM servicing, payment services, guarding and related logistics. Moody's anticipates over $3.75 billion of revenue in 2019.

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 credit rating action on the support provider and in relation to each particular credit 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 credit rating action, and whose ratings may change as a result of this credit 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.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

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.

Edmond DeForest
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Lenny J. Ajzenman
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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