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Announcement:

Moody's reviews Aston Martin's B3 ratings for downgrade

Global Credit Research - 30 Nov 2012

Approximately GBP304 million of debt affected

Frankfurt am Main, November 30, 2012 -- Moody's Investors Service today has placed the B3 corporate family rating (CFR) and the B3 probability of default rating (PDR) of Aston Martin Holdings (UK) Limited ("Aston Martin") as well as the B3 rating of the senior secured notes issued by Aston Martin Capital Limited, Jersey, under review for downgrade.

RATINGS RATIONALE

"The review was prompted by a significant deterioration in Aston Martin's liquidity profile as per end September 2012, caused by a much weaker cash generation and operating performance in the third quarter than anticipated by the company and compared to Moody's expectations" says Falk Frey, Moody's analyst for European Automotive manufacturer. "A high negative free cash flow in Q3 2012 has materially reduced Aston Martin's cash availability prior to the upcoming interest payment of GBP14 million due in January 2013", Mr. Frey added.

Moody's understands that Aston Martin is in an advanced stage to secure a capital increase which, if it would materialize, should have a material positive impact on Aston Martin's liquidity profile.

For the first nine months of 2012 Aston Martin reported a decline in revenues by 19.0% to GBP305 million, mainly driven by a 19.5% decline in volume sales to 2,520 vehicles from 3,132 vehicles in the first nine months 2011. In addition, the model mix regarding the proportion of V12 sales in the nine months falling to 56% in 2012 as compared to 61.8%, whilst V8 volumes increased to 36.6% in 2012 as compared to 29.9% in 2011 resulting in a reduction in operating profit by GBP7.3 million to an operating loss of GBP3.6 million. Consequently and due to the delay of the new Vanquish model, Aston Martin has revised its outlook for the fiscal year results downwards and now expects full year adjusted EBITDA to be below 2011 levels of GBP76.2 million (prior to any adjustments by Moody's) compared to the previous expectation of a higher EBITDA level in 2012 when compared with 2011.

Aston Martin's liquidity profile deteriorated materially in the third quarter 2012 given a negative free cash flow as defined by Moody's of approximately GBP27 million in that quarter. Consequently, cash on balance sheet has been reduced to GBP24.8 million as of 30 September. However, together with the GBP20 million drawn under the revolving credit facility after the end of the quarter and working capital releases in the fourth quarter of 2012 as expected by the management, those funds should enable Aston Martin to pay its interest due in January 2013.

The review will mainly but not exclusively focus on (i) the outcome of the current discussion to secure a capital increase and its possible impact on Aston Martin's capital structure and liquidity profile as well as (ii) the company's ability to turn around its operating performance and cash flow generation based on higher volume sales driven also by a strong demand for its new model launches Vanquish and DB9.

WHAT COULD CHANGE THE RATINGS DOWN/UP

The inability of the company to raise equity and materially improve its liquidity profile within the next couple of weeks would most likely result in a downgrade of Aston Martin's ratings that might not be limited to one notch.

As the rating is under review for downgrade, an upgrade of the ratings is currently unlikely. However, the ratings could come under upward pressure should Aston Martin's capital structure and liquidity position materially improve and the company at the same time be able to turn around its operating performance and cash flow generation evidenced by the ability to generate a sustainable free cash flow and improve its leverage ratio of adjusted debt/EBITDA below 6.0x on a sustainable basis.

Aston Martin's B3 corporate family rating continues to reflect: (i) Limited size and financial strengths compared to some direct peers that are part of a larger group of European car manufacturers; (ii) its relatively narrow product line focusing on high end luxury sports cars with the exception of the Cygnet model as well as (iii) its sizable foreign exchange risk given its fixed cost base in UK compared to a sizable share of revenues generated from exports to Europe and the US and (iv) the operational risks related to the production of all models in one single plant in UK.

However, Aston Martin's rating also reflects certain positives: (i) the company's strong brand name and pricing position in the luxury car segment; (ii) its lean organization with a high degree of flexibility in its cost structure demonstrated by a solid reported profitability through the recent economic crisis as well as (iii) a solid product pipeline with continued model renewals expected for the next couple of years as well as derivatives given its highly flexible production through a common architecture.

On Review for Possible Downgrade:

..Issuer: Aston Martin Capital Limited

....Senior Secured Regular Bond/Debenture, Placed on Review for Possible Downgrade, currently B3

..Issuer: Aston Martin Holdings (UK) Limited

.... Probability of Default Rating, Placed on Review for Possible Downgrade, currently B3

.... Corporate Family Rating, Placed on Review for Possible Downgrade, currently B3

Outlook Actions:

..Issuer: Aston Martin Capital Limited

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

..Issuer: Aston Martin Holdings (UK) Limited

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

The principal methodology used in rating Aston Martin Holdings (UK) Ltd and Aston Martin Capital Ltd was the Global Automobile Manufacture Industry Methodology published in June 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.

Aston Martin, domiciled in Gaydon, UK is a car manufacturer focused on the high luxury sports car segment. The company offers a range of eight models and generated sales of GBP435 million for the twelve months ended September 30, 2012 and an EBITDA of approx. GBP58 million (prior to any adjustments by Moody's) from the sale of 3,749 cars.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant 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 relevant 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 relevant 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.

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

Information sources used to prepare each of the ratings are the following: parties involved in the ratings, public information, and confidential and proprietary Moody's Investors Service information.

Moody's considers the quality of information available on the rated entities, obligations or credits satisfactory for the purposes of issuing these reviews.

Moody's adopts all necessary measures so that the information it uses in assigning the ratings is of sufficient quality and from sources Moody's considers to be reliable including, when appropriate, independent third-party sources. However, Moody's is not an auditor and cannot in every instance independently verify or validate information received in the rating process.

Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entities or their related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

Please see the ratings disclosure page on www.moodys.com for general disclosure on potential conflicts of interests.

Please see the ratings disclosure page on www.moodys.com for information on (A) MCO's major shareholders (above 5%) and for (B) further information regarding certain affiliations that may exist between directors of MCO and rated entities as well as (C) the names of entities that hold ratings from MIS that have also publicly reported to the SEC an ownership interest in MCO of more than 5%. A member of the board of directors of this rated entity may also be a member of the board of directors of a shareholder of Moody's Corporation; however, Moody's has not independently verified this matter.

Please see Moody's Rating Symbols and Definitions on the Rating Process page on www.moodys.com for further information on the meaning of each rating category and the definition of default and recovery.

Please see ratings tab on the issuer/entity page on www.moodys.com for the last rating action and the rating history. The date on which some ratings were first released goes back to a time before Moody's ratings were fully digitized and accurate data may not be available. Consequently, Moody's provides a date that it believes is the most reliable and accurate based on the information that is available to it. Please see the ratings disclosure page on our website www.moodys.com for further information.

In addition to the information provided below please find on the ratings tab of the issuer page at www.moodys.com, for each of the ratings covered, Moody's disclosures on the lead rating analyst and the Moody's legal entity that has issued each of the ratings.

Falk Frey
Senior Vice President
Corporate Finance Group
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Matthias Hellstern
Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Releasing Office:
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's reviews Aston Martin's B3 ratings for downgrade
No Related Data.

 

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