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Global Credit Research - 16 Jul 2010
Approximately $229 million of rated debt affected
New York, July 16, 2010 -- Moody's Investors Service (Moody's) upgraded Euronet Worldwide,
Inc's ("Euronet" or the "Company) corporate family
and probability of default ratings to Ba3 from B1, and the ratings
for its senior secured credit facilities to Ba1 from Ba2. The ratings
outlook is stable. Concurrently, Moody's also upgraded
the Company's Speculative Grade Liquidity rating to SGL-1
The upgrade of the corporate family rating recognizes Euronet's
track record of steady deleveraging through debt reduction and EBITDA
growth, and the Company's stable free cash flow generation,
particularly during a difficult global macro-economic environment
in 2008 and 2009. The upgrade reflects Moody's expectations
that Euronet's revenue and EBITDA growth rates will modestly improve
year-over-year, driven by the Company's well
established market position in its key markets, new product offerings,
geographic expansion, and generally a more favorable economic outlook
relative to the prior year.
The Ba3 corporate family rating reflects Euronet's good market position
in its key markets within its electronic financial transactions,
prepaid and money transfer segments. The rating also considers
the Company's good business execution, evidenced by revenue
and EBITDA growth of about 8%-to-10% (CAGR
between 2007 and 2009, on a constant US Dollar basis) through organic
growth and acquisitions, and the geographic and end-customer
diversity of the Company's revenues. Euronet's Ba3
corporate family rating is supported by its moderate leverage of 2.6x
(Total Debt/EBITDA, Moody's adjusted) and good free cash flow
generation of about 10%-to-15% of total debt
(excluding changes in working capital).
However, Euronet's rating is constrained by its moderate scale,
as measured by normalized earnings and free cash flows, and low
profitability. In addition, the rating considers the Company's
highly competitive business environment, its challenges in driving
organic revenue growth amid a slow global economic recovery and increasing
pricing pressure, particularly on ATM transaction-based revenues.
Moody's believes that ATM usage fees will likely trend down,
especially in jurisdictions where they are comparatively higher,
due to downstream impacts of regulatory pressure to lower "interchange
fee", which in turn could pressure Euronet's highly
profitable ATM transaction-based revenues. Specifically,
Euronet faces a reduction in interchange fee in Poland by Visa Europe
(from about PLN 3.50 to PLN 1.30), which management
believes could reduce the Company's pre-tax profits by about
$5.6 million in fiscal year 2010 and $5 million in
fiscal year 2011. Moody's notes that Euronet also faces uncertainty
in sustaining its increased ATM surcharge rates in Germany, which
could have some impact on the Company's profitability.
The rating agency also believes that revenue growth will likely be constrained,
at least in the near term, due to continued softness (albeit improving)
in money transfers from the U.S. to Mexico and challenges
in replacing revenues from mobile recharge product that has matured in
certain legacy markets.
While the Ba3 corporate family rating considers modest-sized acquisitions
to augment organic cash flow growth, the rating could likely be
lowered if the Company were to pursue large debt-financed acquisitions
that could materially alter its capital structure and increase business
The following ratings were upgraded:
Corporate Family Rating to Ba3 from B1
Probability of Default Rating to Ba3 from B1
$100 million Senior Secured Revolving Credit Facility due 2012
to Ba1 (LGD2, 18%) from Ba2 (LGD2, 26%)
$129 million of Senoir Secured Term Loan to due 2014 to Ba1 (LGD2,
18%) from Ba2 (LGD2, 26%)
Speculative Grade Liquidity to SGL-1 from SGL-2
For more detailed credit opinion, please refer to moodys.com
The last rating action on Euronet took place on March 12, 2007 when
Moody's assigned first-time ratings to its senior secured credit
facilities, which were used to finance in part the acquisition of
The principal methodology used in rating Euronet was Moody's rating methodology
for Global Business and Consumer Service Industry, published in
August 2007 and available on www.moodys.com in the Rating
Methodologies sub-directory under the Research & Ratings tab.
Other methodologies and factors that may have been considered in the process
of rating this issuer can also be found in the Rating Methodologies sub-directory
on Moody's website.
Euronet Worldwide, headquartered in Leawood, Kansas,
is a global electronic payments provider. The Company mainly provides
automated teller machine, point-of-sale, and
card outsourcing service; electronic distribution of mobile airtime
and other prepaid product, and global consumer money transfer services.
Revenues for the LTM 1Q 2010 period were $1.05 billion.
Corporate Finance Group
Moody's Investors Service
Kendra M. Smith
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service
Moody's upgrades Euronet's Corporate Family Rating to Ba3; Outlook is stable
No Related Data.
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