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Rating Action:

Moody's assigns first-time Baa3 ratings to Informa; outlook stable

20 Jun 2018

London, 20 June 2018 -- Moody's Investors Service, ("Moody's") has today assigned a Baa3 issuer rating to Informa Plc ("Informa") following the completion of its acquisition of UK-based exhibition company UBM plc ("UBM"). Concurrently, Moody's has assigned a (P)Baa3 rating to the GBP2.5 billion EMTN programme to be issued by Informa, and affirmed the Baa3 rating on UBM's USD350 million senior unsecured notes due 2020 as the notes benefit from an unconditional and irrevocable guarantee from Informa, effectively putting senior unsecured instruments issued at its level at the same priority and ranking as Informa's own senior unsecured obligations. Following the reorganisation, Moody's has withdrawn the Baa3 issuer rating of UBM as it is now a wholly owned subsidiary of Informa. The outlook on all ratings is stable.

"The Baa3 rating reflects Informa's leading position as the number one exhibition organizer globally following the acquisition of UBM, its well diversified operations by geography and business line, the strong underlying trends of the exhibitions business and its moderate leverage," says Christian Azzi, a Moody's Assistant Vice President - Analyst and lead analyst on Informa.

"While credit metrics are initially weak for the Baa3 category, the rating reflects our expectation that Informa will successfully integrate recent acquisitions, and reduce debt through EBITDA growth and positive free cash flow generation," adds Mr Azzi.

A list of all affected ratings can be found at the end of this press release.

RATINGS RATIONALE

Informa's Baa3 rating reflects the company's (1) leading position in the global events industry and the good fundamentals of that sector which offers strong cash flow generation and mid-single-digit revenue growth in the coming 12-18 months; (2) good revenue diversification by geography and event verticals, (3) balanced proportion of visible revenues from the mix of Global Exhibitions' advance bookings as well as Business Intelligence and Academic Publishing subscriptions; (4) strong cash flow generation with pro-forma RCF/Net Debt around 17% in 2017; and (5) well defined financial policy, with a net debt/EBITDA (calculated as per the company's covenant requirements) target of 2.0x-2.5x.

The rating also reflects (1) a Moody's adjusted leverage of 3.5x on a pro-forma basis for 2017 which Moody's expects will remain above 3.0x until 2019; (2) the company's comparatively larger than peers exposure to book publishing and the Social Sciences and Humanities segment, both of which have weaker fundamentals than the fast growing online journals and the more resilient Science Technology and Medical category; (3) the execution and integration risks inherent to Informa's stated strategy to engage in further M&A as it looks to consolidate and grow its market position in the business information services segment; and (4) the increased proportion of revenue that is derived from events which are exposed to cyclicality or structural pressures in their industry verticals (e.g. fashion).

In January 2018, Informa announced the acquisition of UBM for GBP3.9 billion, funded with shares (GBP3.2 billion) and a new debt facility (GBP0.7 billion). The transaction closed on 15 June 2018.

Following the acquisition of UBM, Informa is now the largest events company worldwide, with revenue of GBP2.7 billion, over half of which will be generated in North America. The combined entity has a share of approximately 7% of the global events market, which remains very fragmented. In terms of divisions, Moody's estimates (based on UBM being 100% consolidated within the Global Exhibitions & Events business) that 52% of revenues will come from Global Exhibitions and Events, 19% from Business Intelligence & Other Marketing Services, 19% from Academic publishing and 9% from Knowledge and Networking.

Moody's views the outlook of the exhibitions market as more positive than the wider media sector as this segment benefits from good overall growth prospects (4.5% in 2018), a degree of short-term revenue visibility and strong cash flow generation given the typically negative working capital and low capex requirements.

Pro-forma for the acquisition, Moody's adjusted leverage for 2017 is around 3.5x, higher than the 3.0x leverage guidance for the current rating. However, given the good expected growth in Informa's exhibition markets as well as expectations that the company will look to apply some of its free cash flow towards debt repayment, Moody's forecasts leverage falling back to below the 3.0x ratings guidance by year-end 2019.

Given the size of UBM relative to Informa, the acquisition is likely to be complex and carries some integration risk. It also comes relatively shortly after another material acquisition, that of Penton Information Services, a US-based exhibitions and professional services group in Q4 2016. Given Informa's strategy to increase its Business Intelligence & Other Marketing Services activities, Moody's expects the company to engage in further acquisitions. However, the current rating and outlook are premised on these acquisitions being bolt-on and limited to around GBP250 million annually over 2018 and 2019.

Informa has a good liquidity profile, supported by around GBP150 million of cash on hand and GBP567 million of availability under its GBP855 million revolving credit facility at 31 December 2017. The company makes use of this RCF during the year as intra-year working capital swings are important -- however these follow a clear and consistent pattern of outflows in the first half of the year before reverting to an inflow of capital in the fourth quarter. The company is currently facing a large maturity wall of GBP825 million in 2020 and the current availability under the new EMTN programme should allow it to stagger maturities and strengthen liquidity further.

RATIONALE FOR STABLE OUTLOOK

The stable outlook reflects Moody's expectations that Informa can achieve revenue and EBITDA growth in line with its publicly stated guidance and that leverage of the company, as adjusted by Moody's, will fall to around 3.0x by 2019.

WHAT COULD CHANGE THE RATING UP/DOWN

While a ratings upgrade is unlikely in the medium-term given the company's M&A appetite, upwards pressure could develop should Informa's adjusted leverage decline to below 2.5x on a sustainable basis and RCF/Net Debt rise above 20%.

Downwards pressure could arise should Informa's operating performance weaken or the company engage in large debt-financed M&A or aggressive shareholder remuneration policies, such that adjusted leverage increases above 3.0x on a sustainable basis and RCF/Net Debt declines to materially below 15%. A weakening in the company's liquidity profile could also exert downward pressure on the rating.

PRINCIPAL METHODOLOGY

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.

LIST OF AFFECTED RATINGS

Assignments:

..Issuer: Informa Plc

.... Issuer Rating, Assigned Baa3

.... Backed Senior Unsecured Medium-Term Note Program, Assigned (P)Baa3

Affirmations:

....Issuer: UBM plc

....Backed Senior Unsecured Regular Bond/Debenture, Affirmed Baa3

Withdrawals:

..Issuer: UBM plc

.... Issuer Rating, Withdrawn, previously rated Baa3

Outlook Actions:

.... Issuer: Informa Plc

.... Outlook, Assigned Stable

.... Issuer: UBM plc

.... Outlook, Remains Stable

COMPANY PROFILE

Headquartered in London, UK, Informa Plc is a London Stock Exchange listed publishing and events company with operations in 30 countries. In 2017, the company generated revenues of GBP1,757 million and EBITDA of GBP585 million.

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.

Christian Azzi
Asst Vice President - Analyst
Corporate Finance Group
Moody's Investors Service Ltd.
One Canada Square
Canary Wharf
London E14 5FA
United Kingdom
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Ivan Palacios
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 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
Client Service: 44 20 7772 5454

No Related Data.
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