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Rating Action:

Moody's changes UBM's rating outlook to negative

08 Feb 2013

London, 08 February 2013 -- Moody's Investors Service has today changed UBM plc's rating outlook to negative from stable. The company's senior unsecured rating is affirmed at Baa3. The change in outlook follows the announced disposal of UBM's Data Services division. While the industrial logic behind the disposal of this 'non-core' division is reasonable, and despite a significant portion of disposal proceeds being used to repay debt, Moody's believes that it will be challenging for UBM to maintain debt protection measurements in line with the Baa3 rating (Debt / EBITDA visibly below 3.75x and RCF / Net Debt well above 12%, both as calculated by Moody's).

RATINGS RATIONALE

Moody's expects UBM's 2012 debt protection measurements to remain marginal for the category. Any improvement in ratios during 2013 is contingent on UBM maintaining good operating momentum into 2013 while refraining from debt-financed acquisitions in the near term. The Data Services divestment is broadly leverage neutral, yielding net cash proceeds of GBP 100 million with a loss of GBP 27.4 million of adjusted operating profits, and therefore does not provide any additional debt capacity under the Baa3 rating. At the same time the divestment reduces the scale and scope of UBM's operations, already a constraining factor for the rating prior to the disposal. UBM's future profits will be even more reliant on its Events division, which will account for more than three-quarters of adjusted operating profits in 2013 on a pro forma basis. Notwithstanding its impressive recent growth track record (+22% reported growth for the nine months ending 30 September 2012), the Events divison remains subject to cyclical shocks.

UBM's Baa3 senior unsecured rating acknowledges: (i) the strength of the company's fast growing Events division, which is a top 5 global player and has leading positions in its chosen vertical markets; (ii) its stable position in the corporate communications markets, with PR Newswire well-placed to continue benefitting from expanding North American markets; and (iii) the cash-generative nature of UBM's business. However the rating is tempered by UBM's: (i) exposure to cyclical advertising and Events markets; (ii) limited size and scope of overall operations; (iii) relatively high leverage for the rating category -- a function of ongoing acquisition activity as part of the strategy to build-out the Events division; (iv) structural challenges in the advertising-funded print publishing market; and (v) minimal profitability of the online Marketing Services division.

The negative rating outlook could be stabilized if UBM achieves visible and sustainable improvements in its debt protection measurements on the back of continued operating momentum, while rebuilding the scale and scope of its operations.

Given UBM's weak positioning in the Baa3 rating category, and an uncertain macroeconomic outlook for 2013, any weakness in operating performance which could hamper the company's ability to deliver continued solid revenue and profit growth, and/or the absence of a visible improvement in credit metrics in 2013, would lead to downgrade pressure on the ratings.

We do not see any catalysts for an upgrade from Baa3 in the near-term. Evidence of strong top-line revenue growth over a number of years and strengthening of market positions, as well as UBM achieving and maintaining an RCF / Net Debt ratio above the high-teens and a Moody's Adjusted Debt / EBITDA ratio well below 3x, on a sustained basis, could result in upward pressure over time.

We consider UBM's liquidity position as adequate. As of June 2012, the company had GBP 108 million of cash on hand, and GBP 153 million of availability under its GBP 300 million Revolving Credit Facility. We expect UBM to repay a significant portion of RCF drawings following the sale of the Data Services division. The company has no material debt maturities until 2016 when the RCF and a GBP 250 million bond fall due. We expect UBM to remain cash generative after dividends.

The principal methodology used in this rating was the Global Publishing Industry published in December 2011. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Following the divestment of the data Services division, UBM plc ("UBM") will be a globally operating, albeit relatively small, events, B2B communications and marketing services provider. Excluding any contribution from the Data Services division, UBM generated revenue of around GBP 611 million in the first nine months of 2012. UBM will operate in four business segments: Events; PR Newswire; Marketing Services -- Online; and Marketing Services -- Print.

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.

Gunjan Dixit
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
SUBSCRIBERS: 44 20 7772 5454

Olivier Beroud
MD - Regional Head EMEA
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 changes UBM's rating outlook to negative
No Related Data.
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