London, 17 January 2011 -- Moody's Investors Service has today assigned a B2 corporate family
rating (CFR) and a B2 probability-of-default rating (PDR)
to Aguila 3 S.A. ("Swissport"), the parent
company of Swissport borrowing group. Concurrently, Moody's
has assigned a provisional (P)B2 rating to Swissport's CHF750 million
worth of seven-year senior secured notes. The outlook on
all ratings is stable.
The rating assignment follows the announcement by PAI partners on 2 November
2010 that it had agreed to acquire the Swissport group from Ferrovial
for a total enterprise value of approximately CHF1.2 billion.
The funds will be escrowed subject to completion of the transaction,
which is scheduled to close in February 2011, subject to certain
conditions and approvals. The rated debt will be used to fund the
acquisition, in conjunction with approximately CHF450 million of
equity.
RATINGS RATIONALE
"The B2 rating reflects Swissport's relatively solid business
profile," says Tanya Savkin, Moody's lead analyst
for Swissport. "Although its revenue is dependent on the
airline industry cycle, the majority of Swissport's ground-handling
services -- which account for approximately 80% of its revenue
-- is linked to turnarounds, i.e. number of flights,
providing a "buffer" effect between passenger volumes and
airline cyclicality," continues Ms Savkin. "The
company's business profile is further supported by customer and
geographical diversification, longer-term agreements with
key customers and the operational effectiveness of the business,
which proved to be relatively resilient during the global economic downturn."
However, Moody's notes that Swissport's financial metrics
are weakened by high leverage of 5.9x (Moody's adjusted,
pro forma for the transaction), placing the company in the single-B
rating category. Moody's expects only modest de-leveraging
on a gross debt basis from Swissport in 2011-2012, although
the rating agency believes that the company will achieve positive cash
flow generation and build up cash on the balance sheet.
Moody's expects that Swissport's scale, combined with
its local presence, will continue to benefit from the outsourcing
trend and the recent cyclical rebound in the airline industry.
Each year, Swissport handles passenger volumes in the region of
70 million and approximately 2.8 million tonnes of cargo for around
650 passenger airlines and freight carriers. In terms of revenue
and the number of stations in which it operates, the company is
positioned as a world leader, while it is no. 2 in terms
of total cargo tonnage handled.
In Moody's view, Swissport's liquidity profile is reasonable,
supported by the undrawn CHF200 million revolving credit facility.
The net leverage maintenance financial covenant under the revolving credit
facility will be set with a minimum headroom of 30% in the first
year and 35% thereafter.
The stable outlook reflects Moody's expectation that (i) there will
be a continued recovery in the market; and (ii) that Swissport will
continue to exhibit operational efficiency and positive cash flow generation.
Positive pressure on the ratings could arise if Swissport's credit
metrics were to improve as a result of a stronger-than-expected
operational performance, leading to a debt/EBITDA ratio of around
5.0x, a free cash flow/debt ratio of around 5% and
a (EBITDA-Capex)/Interest expense ratio above 2.0x.
Downward pressure could occur as a result of: (i) a deterioration
in the company's debt/EBITDA ratio to above 6.0x; (ii)
free cash flow turning negative; and (iii) (EBITDA-Capex)/Interest
expense ratio falling below 1.5x.
Moody's issues provisional ratings in advance of the final sale
of securities and these ratings reflect Moody's preliminary credit
opinion regarding the transaction only. Upon a conclusive review
of the final documentation, Moody's will endeavour to assign
a definitive rating to the notes. A definitive rating may differ
from a provisional rating.
The principal methodologies used in this rating were Global Business &
Consumer Service Industry Rating Methodology published in October 2010,
and Loss Given Default for Speculative-Grade Non-Financial
Companies in the U.S., Canada and EMEA published in
June 2009.
Headquartered in Zurich, Swissport is the largest independent ground-handling
services company in the world. The company employs around 32,000
personnel in 176 airports in 38 countries worldwide, with around
57% of 2009 revenue derived from Europe, 28% from
North America, 9% from Latin America, 5% from
Africa and the remaining 1% from Asia. For the period of
LTM September 2010 Swissport reported revenues and adjusted Ebitda of
approximately CHF1.7 billion and CHF164 million, respectively.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information and confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit 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.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
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and accurate based on the information that is available to it.
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used in determining ratings, further information on the meaning
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London
Tanya Savkin
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Chetan Modi
Senior Vice President
Corporate Finance Group
Moody's Investors Service Ltd.
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SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Ltd.
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Moody's assigns B2 ratings to Aguila 3 S.A./Swissport (Switzerland)
