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Rating Action:

Moody's assigns a provisional (P)Ba3 rating to Rexel's new senior unsecured notes.

19 Mar 2013

London, 19 March 2013 -- Moody's Investors Service has today assigned a provisional (P)Ba3 rating to Rexel SA (Rexel)'s proposed dual tranche senior unsecured notes due June 2020. The outlook on all Rexel's ratings is negative.

Moody's understands that the proceeds of the new senior unsecured notes will be used to redeem the 8.25% senior unsecured notes due 2016 and for general corporate purposes.

Moody's issues provisional ratings in advance of the final sale of securities and these reflect Moody's credit opinion regarding the transaction only. Upon closing of the transaction and a conclusive review of the final documentation, Moody's will endeavour to assign definitive ratings to the Bonds. A definitive rating may differ from a provisional rating.

RATINGS RATIONALE

The (P)Ba3 rating assigned to the proposed issuance of EUR500 million and USD500 million senior unsecured notes due June 2020 reflects their pari passu ranking with all other unsecured indebtedness issued by Rexel and their unmitigated structural subordination to non-financial liabilities at the operating companies. Moody's notes however that there is no material secured debt existing within the group (notwithstanding the receivables securitization programme).

Although Rexel's Ba2 CFR incorporates the positive steps taken by Rexel to improve its margins, as evidenced in 2010, 2011 and 2012 results, it is currently constrained by the company's weak credit metrics and the uncertainty about the pace at which those credit metrics might improve given the global macroeconomic uncertainties prevailing, the late-cycle nature of the industry in which Rexel operates and the potential for shareholder friendly financial policies. More positively, Rexel's Ba2 CFR remains supported by the company's large scale as well as its strong market positions with either number one or two market rankings in most Western European and North American countries. It is also supported by the company's solid liquidity profile which will be further enhanced by the longer dated debt maturity profile following the issuance of the new notes due June 2020 and the new revolving credit facility which matures in 2018.

OUTLOOK

The outlook which was changed to negative from stable in February 2013 reflects Rexel's weaker than expected credit metrics as of December 2012 with limited prospects for meaningful recovery in 2013 given the difficult macro-economic environment and the late-cycle nature of Rexel's business. It also reflects some uncertainty as to the level of future free cash flow generation, considering the level of cash dividends in conjunction with ongoing M&A activity.

WHAT COULD CHANGE THE RATING UP/DOWN

The ratings outlook could stabilise if Rexel demonstrates a prudent financial policy as well as a successful implementation of its Energy in Motion strategy leading to growth in profitability, while maintaining a net debt/EBITDA ratio (as adjusted by Moody's) sustainably below 4.0x and a retained cash flow (RCF)/net debt (as adjusted by Moody's) above 15%. Downward pressure on the rating could potentially result from any further deterioration in Rexel's credit protection measures resulting from more adverse trading conditions beyond Moody's expectations for 2013; from shareholder friendly policies, such that its (RCF)/net adjusted debt sustainably falls below 15% or if its net adjusted debt/EBITDA (as adjusted by Moody's) remains above 4.0x or from debt-funded acquisitions beyond Moody's current expectations.

The principal methodology used in this rating was the Global Distribution & Supply Chain Services published in November 2011. 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 this/these methodology.

Headquartered in Paris, France, Rexel SA is a global leader in the EUR165 billion low-voltage electrical distribution market. Rexel is ultimately controlled by Ray Investment, a holding company (jointly owned by CD&R Investment Funds, Eurazeo, BAML Capital Partners and Caisse de Depot et Placement du Quebec) which holds about 43% of its shares. Parts of the company's shares are listed on Euronext Paris with the float representing around 54%.

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.

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.

Margaux Pery
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
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
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

Moody's assigns a provisional (P)Ba3 rating to Rexel's new senior unsecured notes.
No Related Data.
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