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Rating Action:

Moody's confirms Vistra's B2 CFR; outlook stable

30 Nov 2018

Singapore, November 30, 2018 -- Moody's Investors Service has confirmed Vistra Group Holdings (BVI) I Limited's B2 corporate family rating (CFR) following its announcement of plans to not move forward with its previously announced debt-funded dividend.

At the same time, Moody's has confirmed Vistra's B2 rating on the first lien term loan B due 2022 and revolving credit facility due 2020 and its B3 rating on the second lien term loan due 2023.

The rating outlook is stable.

This concludes the review of the ratings initiated by Moody's on 14 November 2018.

RATINGS RATIONALE

"The B2 CFR balances Vistra's strong growth trajectory, high margins, predictable cash generation and very good liquidity with its high leverage and aggressive financial policies," says Brian Grieser, a Moody's Vice President and Senior Credit Officer.

Moody's expects debt/EBITDA to be around 6.4x at 31 December 2018 and fall below 6.0x in 2019, in the absence of any large debt-funded dividends or acquisitions.

Moody's expects deleveraging to be primarily driven by earnings growth in 2019. Vistra's EBITDA will benefit from solid underlying organic growth prospects, earnings and synergies from recent acquisitions and benefits from ongoing cost-saving initiatives.

The B2 rating also reflects Vistra's top 4 market position in the fragmented corporate and trust services industry, high barriers to entry fostered by long-standing relationships with a well-diversified customer base, and high cash flow visibility driven by the recurring nature of its revenue.

The stable outlook reflects Moody's expectation that Vistra will focus on integrating its most recent acquisition, Radius Holdco Limited, and the execution of its company-wide initiatives for operational improvements in 2018-19.

As such, acquisition activity is expected to moderate which will allow for margin improvement and solid cash generation. The outlook also reflects Moody's view that leverage will remain high and be utilized on an ongoing basis to execute Vistra's bolt-on acquisition growth strategy.

The ratings could be upgraded over the next two years if Vistra continues to demonstrate solid organic growth trends and margin improvement, while maintaining its very good liquidity.

Furthermore, the ratings could be upgraded if Vistra demonstrates a balanced approach to dividends and acquisitions, such that it' debt/EBITDA is maintained around 5.0x.

Vistra's ratings could be downgraded if its integration plans fail to provide synergies, new litigation or regulatory standards weaken its cash flow or earnings profile, or if the company undertakes another transformative acquisitions or large debt-funded dividends over the next 12-18 months.

Specifically, its ratings could be downgraded if (1) adjusted debt/EBITDA exceeds 6.5x for an extended period; (2) sustained adjusted EBITA/interest expense drops below 1.5x; or (3) adjusted retained cash flow to net debt falls below 5%.

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.

Vistra Group Holdings (BVI) I Limited is a provider of corporate & trust services for companies (private companies, SMEs, listed companies), high net worth individuals and funds, with around 50% of gross fees generated in Asia, and the balance primarily generated in Europe. Services include company formation and renewal services, corporate administration services, trustee and fiduciary services, fund services and family office services. Vistra employs over 4,000 employees in 46 countries.

Vistra was acquired by Baring Private Equity Asia (BPEA) in October 2015. At the same time, BPEA acquired the Orangefield Group and integrated the two businesses. The two acquisitions cost approximately $1.4 billion. The acquisitions were funded with a combination of proceeds from the $700 million term loans and an equity injection by BPEA.

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.

Brian Grieser
VP - Senior Credit Officer
Corporate Finance Group
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Laura Acres
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

Releasing Office:
Moody's Investors Service Singapore Pte. Ltd.
50 Raffles Place #23-06
Singapore Land Tower
Singapore 48623
Singapore
JOURNALISTS: 852 3758 1350
Client Service: 852 3551 3077

No Related Data.
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