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Rating Action:

Moody's upgrades Amadeus to Baa2; outlook remains stable

14 Jun 2013

London, 14 June 2013 -- Moody's Investors Service has today upgraded by one notch the long-term issuer and senior unsecured ratings of Amadeus IT Holding, S.A. and its guaranteed subsidiaries to Baa2 from Baa3. The outlook on the ratings remains stable.

Today's upgrade acknowledges Amadeus's strong underlying operating performance -- resulting in continuous deleveraging and improvement of cash flow metrics -- that the company has exhibited since Moody's first assigned the ratings in 2011.

RATINGS RATIONALE

The upgrade to Baa2 reflects (1) the company's leading position in the market for Global Distribution Services (GDS) providers; (2) its generally resilient profitability compared with the airline industry that it serves; and (3) the smaller, albeit higher-margin, IT solutions business, which have fairly high barriers to entry. The rating also captures several challenges inherent in the GDS industry, notably (1) the risk of further disintermediation by airlines; and (2) the risk of alternative distribution models emerging.

Amadeus's wide international exposure has allowed it to continue demonstrating strong performance in its distribution segment, in an operating environment that has been challenging over the last 12 months. Moody's also notes the growing importance of the company's IT solutions in Amadeus's business-mix, representing 24.4% of FY2012-revenues. Moody's considers that the IT solutions provide strong support to the company's core activity of distribution as the solutions-division benefits from an overall high level of visibility on future operating performance. Moody's also acknowledges Amadeus's limited exposure to Spain -- representing around 3% of transactions as of FY2012 -- and considers that the company can be largely but not totally delinked from Spain's sovereign rating of Baa3, negative.

Moody's considers that Amadeus exhibits a solid liquidity-profile and benefits from (1) cash on balance sheet (EUR400 million at the end of Q1 2013); (2) access to an undrawn EUR200 million revolving credit facility; and (3) annual free cash flows of around EUR250 million per year. Moody's understands that Amadeus's cash balances are available on short notice and are largely located in banks outside European peripheral countries.

In May this year, Amadeus reimbursed a EUR106 million bridge loan and an EUR100 million installment of its term loan A. Upcoming debt-maturities in 2014 (around EUR220 million) and 2015 (around EUR300 million) are expected to be covered mostly by the company's own free cash flows.

RATIONALE FOR THE STABLE OUTLOOK

The outlook on the ratings is stable and reflects Moody's assumptions that (1) Amadeus will continue generating strong free cash flows on the back of further market-share gains in its distribution-segment; and (2) the growth of passengers boarded in its IT-solutions division will remain strong. The stable outlook also reflects Moody's assumption that Amadeus will continue adhering to its self-imposed leverage target of net debt to EBITDA in the 1.0x-1.5x range, while maintaining a payout-ratio of 40%-50% of net income.

WHAT COULD CHANGE THE RATING UP/DOWN

In view of the elevated business risk within Amadeus's industry, further upward pressure is unlikely in the near term. An upgrade would require larger scale in combination with increased diversification. Moreover, an upgrade would also require a Debt/ EBITDA sustainably below 1.5x and RCF/Net Debt above 50%. Conversely, negative rating pressure could develop if adjusted gross leverage were to remain above 2.0x or RCF/ Net Debt fell below 30% on a sustained basis. A one-notch downgrade of the sovereign rating, if it was to occur, would not be expected to have any negative impact on Amadeus ' rating.

PRINCIPAL METHODOLOGY

The principal methodology used in these ratings was the Global Business & Consumer Service Industry Rating Methodology published in October 2010. Please see the Credit Policy page on www.moodys.com for a copy of this methodology.

Amadeus IT Holding S.A. is a Global Distribution Systems (GDS) provider which offers technology solutions to travel providers and agencies, as well as IT solutions to airlines, such as reservations, inventory management and other operational processes at airports. In 2012 to December, the company reported revenues and recurring EBITDA from continuing operations and before exceptional items of EUR2.9 billion and EUR1.1 billion, respectively.

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.

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.

Knut Magne Slatten
Analyst
Corporate Finance Group
Moody's France SAS
96 Boulevard Haussmann
Paris 75008
France
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Eric de Bodard
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 upgrades Amadeus to Baa2; outlook remains stable
No Related Data.
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