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Rating Action:

Moody's downgrades Rexel's senior unsecured notes to Ba3; Ba2 CFR affirmed

18 Mar 2013

London, 18 March 2013 -- Moody's Investors Service has today downgraded Rexel SA (Rexel)'s senior unsecured notes due December 2016, 2018 and 2019 to Ba3 from Ba2. Concurrently, Moody's has affirmed the company's Ba2 corporate family rating (CFR) and Ba2-PD probability of default rating. The outlook on all ratings remains negative.

RATINGS RATIONALE

On 15 March 2013, Rexel repaid the EUR150 million drawn under its EUR1.074 billion revolver, and subsequently replaced it with a new revolving credit facility agreement whereby the company will have access to a EUR1.1 billion revolving credit facility and a EUR165 million swingline facility. The new revolving credit facility does not benefit from upstream guarantees. As a result, the upstream guarantees that were attached to the existing senior unsecured notes will be released so that noteholders and lenders continue to have equal treatment.

The release of the upstream guarantees from material operating companies for the benefit of the senior unsecured notes has resulted in the downgrade of the rating of the senior unsecured notes to Ba3 from Ba2. The Ba3 rating, one notch below the CFR, reflects their unmitigated structural subordination to non-financial liabilities at the operating companies. Moody's notes however that there is no material secured debt existing within the group (notwithstanding the receivables securitization programme).

The Ba2 CFR is affirmed. Although it incorporates the positive steps taken by Rexel to improve its margins, as evidenced in 2010, 2011 and 2012 results, it is currently constrained by the company's weak credit metrics and the uncertainty about the pace at which those credit metrics might improve given the global macroeconomic uncertainties prevailing, the late-cycle nature of the industry in which Rexel operates and the potential for shareholder friendly financial policies. Additionally, the terms and conditions of the new revolving credit facility agreement offer further flexibility in terms of the maintenance financial covenants as Rexel is allowed to exceed its 3.5x net leverage ratio three times during the life of the new revolving credit facility.

More positively, Rexel's Ba2 CFR remains supported by the company's large scale as well as its strong market positions with either number one or two market rankings in most Western European and North American countries. It is also supported by the company's solid liquidity profile.

OUTLOOK

The outlook which was changed to negative from stable in February 2013 reflects Rexel's weaker than expected credit metrics as of December 2012 with limited prospects for meaningful recovery in 2013 given the difficult macro-economic environment and the late-cycle nature of Rexel's business. It also reflects some uncertainty as to the level of future free cash flow generation, considering the level of cash dividends in conjunction with ongoing M&A activity.

WHAT COULD CHANGE THE RATING UP/DOWN

The ratings outlook could stabilise if Rexel demonstrates a prudent financial policy as well as a successful implementation of its Energy in Motion strategy leading to growth in profitability, while maintaining a net debt/EBITDA ratio (as adjusted by Moody's) sustainably below 4.0x and a retained cash flow (RCF)/net debt (as adjusted by Moody's) above 15%. Downward pressure on the rating could potentially result from any further deterioration in Rexel's credit protection measures resulting from more adverse trading conditions beyond Moody's expectations for 2013; from shareholder friendly policies, such that its (RCF)/net adjusted debt sustainably falls below 15% or if its net adjusted debt/EBITDA (as adjusted by Moody's) remains above 4.0x or from debt-funded acquisitions beyond Moody's current expectations.

The principal methodology used in this rating was the Global Distribution & Supply Chain Services published in November 2011. 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.

Headquartered in Paris, France, Rexel SA is a global leader in the EUR165 billion low-voltage electrical distribution market. Rexel is ultimately controlled by Ray Investment, a holding company (jointly owned by CD&R Investment Funds, Eurazeo, BAML Capital Partners and Caisse de Depot et Placement du Quebec) which holds about 43% of its shares. Some of the company's shares are listed on Euronext Paris with the float representing around 54%.

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.

Margaux Pery
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

Chetan Modi
MD - Corporate Finance
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 downgrades Rexel's senior unsecured notes to Ba3; Ba2 CFR affirmed
No Related Data.
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