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Global Credit Research - 14 Apr 2011
Frankfurt am Main, April 14, 2011 -- Moody's Investors Service has today assigned a B3 corporate family rating
(CFR) and probability of default rating (PDR) to Dematic SARL, a
Luxemburg based leading provider of logistics and materials handling solutions
with a strong focus on food, general merchandise and apparel retail.
At the same time, it has assigned a provisional (P)B3 rating to
the EUR214 million senior secured guaranteed notes to be issued by Dematic
SA, a fully owned and guaranteed subsidiary of Dematic SARL.
The outlook on all ratings is positive. This is the first time
that Moody's has rated Dematic SARL.
The assignment of a definitive rating to the new EUR214 million Senior
Secured Notes is subject to a review of the associated documentation.
Moody's issues provisional ratings in advance of the final sale of securities,
and these ratings only represent Moody's preliminary opinion. Upon
a conclusive review of the transaction and associated documentation,
Moody's will endeavor to assign definitive ratings to the securities.
A definitive rating may differ from a provisional rating.
Dematic's B3 CFR reflects (i) its strong market position in a relatively
fragmented logistics and materials handling solutions industry,
(ii) the group's improving cost position and project execution since
the business was acquired by Triton in 2006, (iii) Dematic's
good level of geographical diversification with strong market positions
in Europe and North America, (iv) the company's exposure to
retail markets, which are generally less cyclical than industrial
end markets although there is a strong element of correlation to GDP growth,
(v) the group's downstream integration into services which help
smoothing the inherent cyclicality of its exposure to investment cycles
of its end customers, and (vi) the relatively strong barriers to
entry protecting the logistics and materials handling solutions industry
through the technological content of the solutions offered, the
long standing relationships existing with customers and the requirement
to have an established network to be close to customers.
Moody's notes that Dematic currently has a strong order backlog
which should be supportive of the operating performance of the group during
the course of fiscal year 2011 and should help the company to delever
in order to achieve a stronger position that would put positive pressure
on the current rating category, hence the positive outlook.
The rating remains constrained by (i) the company's leveraged capital
structure pro-forma of the group's refinancing and payout
of dividends to its owner with a proforma debt / EBITDA of 6.5x
as adjusted and estimated by Moodys (based on LTM December 2010 figures
including only 3 months of consolidation of HK Systems); (ii) Dematic's
relatively small size and lack of product diversification compared to
the rated universe although Dematic has market leading positions in its
markets, (iii) the group's history of poor operating performance
and project execution which is mitigated by the fact that Dematic has
worked hard on reducing costs and improving project execution since being
acquired by Triton in 2006 and has posted a much improved 2010 operating
performance, and (iv) the relatively lenient terms of the notes
which allows incremental indebtedness and 50% dividend payout ratio
if senior leverage does not exceed 3.25x and fixed coverage ratios
is above 2.0x.
Although the EUR 25 million super senior revolving credit facility will
rank ahead of the proposed notes in an event of default, this is
not sufficient to justify a notching of the notes which are the only other
debt instrument in the new structure. Therefore a (P)B3 rating
was assigned to the notes. Both super senior lenders and senior
secured notes holders would share the same collateral pool representing
a material portion of the group's assets.
The liquidity profile of Dematic pro-forma of the refinancing is
adequate. Main liquidity needs of Dematic over the next twelve
months mainly consist of working capital and capex funding requirements
and are expected to be covered from operating cash flows. The liquidity
of the group is further supported by EUR30 million of cash on balance
sheet pro-forma of the refinancing and the access to EUR25 million
of undrawn revolving credit facilities and EUR60 million of guarantee
facilities (expected to be used at around EUR35mio pro-forma of
the refinancing). The group's new revolving and guarantee
facilities include a minimum EBITDA financial covenant.
Moody's would consider upgrading its ratings if Dematic can sustain
current operating performance and cash flow generation levels and apply
free cash flow generation to debt repayments in order to reduce Debt /
EBITDA below 5.5x on a sustainable basis.
Conversely a deterioration in operating performance through cost overruns,
and declining activity levels leading to a deterioration in debt metrics
with Debt / EBITDA trending above 7.0x would lead to negative pressure
on the ratings.
The principal methodology used in rating Dematic SARL was the Global Manufacturing
Industry methodology, which can be found at www.moodys.com
in the Rating Methodologies sub-directory under the Research &
Ratings tab. Other methodologies and factors that may have been
considered in the process of rating this issuer can also be found in the
Rating Methodologies sub-directory on Moody's website.
Headquartered in Luxembourg, Dematic is a leading provider of logistics
and materials handling solutions with a strong focus on food, general
merchandise and apparel retail. Dematic holds n°1 positions
in global logistics automation equipment and as a services supplier (n°1
in North America, n°2 in Europe and Asia Pacific). Key
clients include Amazon, Wal-Mart, JCPenney, Deutsche
Post, Unilever, Tesco, Woolworths and Jiangsu Tobacco.
Triton, a private equity firm with EUR 4.1 billion in committed
capital acquired Dematic from Siemens back in 2006.
Dematic generated revenues of EUR 726 million for the fiscal year ended
30th September 2010. The company employed 4,137 people at
fiscal year-end September 2010 .
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/maintaining
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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Frankfurt am Main
Vice President - Senior Analyst
Corporate Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Frankfurt am Main
Senior Vice President
Corporate Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Deutschland GmbH
Moody's assigns B3 CFR to Dematic SARL; positive outlook
An der Welle 5
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