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Rating Action:

Moody's downgrades InfoPro to B3; outlook stable

30 Jun 2020

Madrid, June 30, 2020 -- Moody's Investors Service, ("Moody's") has today downgraded the corporate family rating (CFR) of IPD 3. B.V. ("IPD" or "InfoPro"), a leading European B2B information provider and event's organizer, to B3 from B2 and its probability of default rating (PDR) to B3-PD from B2-PD. Concurrently, Moody's has downgraded to B3 from B2 the rating of the €475 million senior secured notes due 2022 and the €175 million senior secured floating rate notes due 2022 issued by IPD 3 B.V..

The outlook on the ratings has been changed to stable from ratings under review.

This action concludes the review for downgrade initiated on April 1, 2020.

"The downgrade reflects our expectation of a deterioration in IPD's operating and financial performance driven by the cancellations and postponements of trade and exhibition shows. It also reflects the contraction in the business-to-business information services due to the knock-on effects of the coronavirus outbreak on the global macroeconomic environment and the negative effects on the financial outlook of many small and medium enterprises, which form the largest part of IPD's customer base," says Víctor García Capdevila, a Moody's AVP-Analyst and lead analyst for IPD.

A full list of affected ratings is provided towards the end of the press release.

RATINGS RATIONALE

The rapid and widening spread of the coronavirus outbreak, deteriorating global economic outlook, falling oil prices, and asset price declines are creating a severe and extensive credit shock across many sectors, regions and markets. The combined credit effects of these developments are unprecedented. Moody's regards the coronavirus outbreak as a social risk under its ESG framework, given the substantial implications for public health and safety. Today's action reflects the impact on IPD of the breadth and severity of the shock, and the broad deterioration in credit quality it has triggered.

The contingency measures taken by public authorities and the private sector to avoid the spreading of the coronavirus, such as social distancing and travel restrictions are leading to the cancellation and postponement of exhibitions and trade shows around the world, affecting IPD's exhibitions business, which generates 17 % of the company's revenue.

Moody's also expects a contraction in revenue and EBITDA in the Information and Insights division (40% of IPD's revenues) because of the expected sharp fall in business activity across advanced economies in 2020.

Moody's expects that most of the revenue in the exhibitions business originally expected in Q2 2020 and Q3 2020 will be lost, while in Q4 2020, when this business generates around 43% of annual sales, activity is unlikely to reach the same level of revenues as in the same period in 2019.

Moody's base case scenario assumes a drop in EBITDA of around 20% in 2020 (including Haynes proforma contribution of €14 million), leading to an increase in Moody's-adjusted gross leverage to 8.3x from 5.7x in 2019.

The increase in leverage is partially mitigated by the acquisition of Haynes Publishing Group P.L.C (Haynes), a multi-national supplier of content, data and workflow solutions for the automotive industry based in the UK. The transaction closed on April 3, 2020 for a total cash consideration of GBP115 million, fully funded with IPD's existing cash balances and drawings under the revolving credit facility. In the fiscal year ending in May 2019, Haynes reported revenue and EBITDA of GBP36 million and GBP13 million, respectively. While Haynes complements IPD geographically and from a product standpoint, it also exposes the company to execution and integration risk at a time when management's attention is focused on mitigating the effects of the coronavirus outbreak on its operations.

In 2021, Moody's expects the company to generate good free cash flow generation of around €34 million and leverage to improve to 6.9x supported by EBITDA growth in the range of 20%-25%. However, this leverage level is still above the maximum leverage tolerance for the existing B2 rating.

LIQUIDITY

IPD's liquidity profile is supported by a cash balance of €75 million at the end of Q1 2020 and a marginal positive free cash flow generation in 2020. The company also has access to a €70 million super senior revolving credit facility (SSRCF), but it is currently fully drawn.

IPD faces a debt maturity wall in 2022 with the €70 million SSRCF maturing in January 2022 and the €650 million notes in July 2022. The B3 rating with stable outlook assumes the successful refinancing of these debts well ahead of maturity.

STRUCTURAL CONSIDERATIONS

The B3 rating on the €650 million senior secured notes, in line with the company's CFR, reflects the notes' second priority ranking in the company's capital structure, behind the SSRCF in the waterfall of liabilities. The notes benefit from a security package over shares only and are guaranteed by a group of subsidiaries, representing no less than 75% of the consolidated group's adjusted EBITDA. The B3-PD probability of default rating, at the same level as the CFR, reflects Moody's assumption of a 50% family recovery rate, as is customary for bond and bank-debt capital structures.

IPD is subject to a springing covenant to be tested when drawings under the €70 million SSRCF exceed 40% of the total. The condition to be met when this covenant is tested is that consolidated adjusted EBITDA is equal or greater than €54 million.

The company's capital structure contains a €204 million shareholder loan accruing interest at a rate of 9% and due in 2026. This instrument receives 100% equity credit under Moody's Hybrid Equity Credit methodology.

RATIONALE FOR STABLE OUTLOOK

The stable outlook reflects Moody's expectation that leverage will improve following the deterioration in 2020, free cash flow generation will be positive and Haynes integration will be successful.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

Positive rating pressure could develop if IPD demonstrates a track record of solid revenue, EBITDA and free cash flow growth, that allows it to reduce Moody's-adjusted gross leverage below 6.0x on a sustainable basis. Upward pressure on the rating would also require a successful refinancing of the debt maturity wall in 2022 and the maintenance of a strong liquidity profile.

Downward rating pressure could develop should operating conditions deteriorate further, and extend into the fourth quarter of 2020 and beyond, such that free cash flow turns negative on a sustainable basis, Moody's-adjusted gross leverage does not improve below 7.5x or liquidity deteriorates.

LIST OF AFFECTED RATINGS

..Issuer: IPD 3 B.V.

Downgrades, previously placed on review for downgrade:

....Probability of Default Rating, Downgraded to B3-PD from B2-PD

....Corporate Family Rating, Downgraded to B3 from B2

....Backed Senior Secured Regular Bond/Debenture, Downgraded to B3 from B2

Outlook Action:

....Outlook, Changed To Stable From Ratings Under Review

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was Business and Consumer Service Industry published in October 2016 and available at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1037985. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

COMPANY PROFILE

InfoPro Digital is a European B2B information company focusing on industry-specific information platforms: (1) Information and Insights; (2) software, data and leads division; and (3) global trade shows. The company generated acquisition-adjusted revenue of €443 million and acquisition-adjusted EBITDA of €126 million in 2019.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1133569.

At least one ESG consideration was material to the credit rating action(s) announced and described above.

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.

Victor Garcia, CFA
AVP-Analyst
Corporate Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
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 Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
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