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Rating Action:

Moody's assigns definitive B2 ratings to Marcolin; outlook positive

Global Credit Research - 17 Jan 2014

Approximately EUR200 million of rated debt affected

Milan, January 17, 2014 -- Moody's Investors Service, ("Moody's") has today assigned a definitive B2 corporate family rating (CFR) to Marcolin S.p.A., an Italian designer, manufacturer and distributor of eyewear. Concurrently, Moody's has assigned a B2-PD probability of default rating (PDR) to the company, and a definitive B2 rating to the EUR200 million of notes due 2019. The outlook on all ratings remains positive.

RATINGS RATIONALE

Today's action reflects the closing of the planned acquisition of Viva Optique Inc. ("Viva"), a US-based eyewear wholesaler, in early December 2013. Following the acquisition, the combined group became the 4th player in the global eyewear market. The transaction has been financed by the proceeds of the EUR200 million senior secured notes issued on November 07, 2013.

The final terms of the Notes are in line with the drafts previously reviewed to assign the provisional ratings.

The PDR of B2-PD, at the same level of the CFR, reflects our assumption of a standard 50% family recovery rate and the fact that the group capital structure comprises a mix of bank and bond debt, including a revolving credit facility which contains financial maintenance covenants and the above mentioned secured notes.

Marcolin's B2 CFR reflects the group's good geographic and product diversification and the expectation of rapid deleveraging. However, the rating is constrained by the group's modest size, the exposure of some of its products to discretionary spending, the exposure to license renewal and a degree of integration risk following the acquisition of Viva. The rating assumes that the group will generate positive free cash flow and reduce its financial leverage over the next 12 to 18 months.

OUTLOOK

The positive outlook on the ratings captures Moody's expectation that Marcolin's will successfully integrate Viva and achieve the targeted cross-selling opportunities and will be able to weather the currently challenging macroeconomic conditions, reducing financial leverage over the next 12-18 months towards 4.5x.

WHAT COULD CHANGE THE RATING UP/DOWN

Sustained improvement in operating performance leading to an RCF to net debt in the high teens and a track record of positive free cash flow generation could result in a rating upgrade. Downward rating pressure could arise if the group's operating profitability or liquidity profile deteriorates, or if prolonged negative free cash flow results in a failure to reduce financial leverage below 5.5x.

PRINCIPAL METHODOLOGY

The principal methodology used in this rating was the Global Consumer Durable Industry rating methodology, published in October 2010. 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 these methodologies.

Founded in 1961 and based in Italy, Marcolin is a leading designer, manufacturer and distributors of eyewear. The company is present both in sunglasses (59% of 2012 group revenues) and in prescription frames (41%) with a global presence. Pro-forma for the Viva acquisition, the group generated EUR349 million of revenues and EUR 39.3 million of adjusted EBITDA excluding one offs and exceptional items during the last twelve months (LTM) period ending September 2013.

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.

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.

Paolo Leschiutta
VP - Senior Credit Officer
Corporate Finance Group
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100

Eric de Bodard
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Italia S.r.l
Corso di Porta Romana 68
Milan 20122
Italy
Telephone:+39-02-9148-1100

Moody's assigns definitive B2 ratings to Marcolin; outlook positive
No Related Data.

 

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