Approximately EUR 126 million of rated debt affected
Frankfurt am Main, February 18, 2011 -- Moody's Investors Service has today upgraded Gerresheimer AG's
corporate family rating (CFR) to Ba1 from Ba2. Concurrently,
the rating agency has upgraded to Ba2 (Loss Given Default assessment of
LGD6 -- 90%) from B1 (LGD6 -- 91%) the rating
on the senior subordinated notes issued by Gerresheimer Holdings GmbH,
a subsidiary of Gerresheimer AG. The outlook on the ratings is
stable.
RATINGS RATIONALE
"Today's upgrade reflects Gerresheimer's further progress
in improving its credit metrics in 2010, as evidenced by strengthened
leverage ratios, including a debt/EBITDA ratio of 2.8x on
a Moody's adjusted basis," says Rainer Neidnig,
a Moody's Assistant Vice President and lead analyst for Gerresheimer.
"Given Gerresheimer's resilient operating and financial performance
during the recession which has evidenced a limited exposure to the economic
cycle, Moody's considers that leverage ratios at levels of
3x debt/EBITDA adequately position the rating in the Ba1 category,"
adds Mr Neidnig.
Moreover, the rating incorporates Gerresheimer's balanced
financial policy, as evidenced by the group's decision to
temporarily suspend dividend payments during the financial crisis and
to abstain from M&A activity in recent years. Although management
is again exploring selective acquisitions in order to generate further
profitable growth, Moody's does not expect that the group's
leverage ratios will materially weaken on a prolonged basis as a result
of potential M&A activity.
Gerresheimer reported results for the fiscal year ended November 2010
on 10 February 2011. The group's sales increased moderately
to EUR1.02 billion, from EUR1.0 billion in 2009,
which represents organic revenue growth of 4.0% on a comparable
basis and at constant foreign exchange rates. Gerresheimer's
profitability recovered to pre-crisis levels after a moderate decline
in 2009. Moreover, the group reported positive free cash
flow (FCF) of EUR84 million, which allowed it to further reduce
its debt. Against this backdrop, leverage decreased to 2.8x,
from 3.4x in 2009.
Moody's notes that Gerresheimer's FCF in 2010 was supported
by the temporary suspension of dividends and a slight decline in capital
expenditures. However, the rating agency expects the group
to remain FCF positive, despite its announced resumption of dividend
payments and a moderate increase in capital expenditures.
The upgrade to Ba2 from B1 of Gerresheimer's EUR126 million worth
of senior subordinated notes is in line with Moody's Loss Given
Default Methodology and driven primarily by the upgrade of the group's
CFR.
Gerresheimer's ratings are based on: (i) the group's
current profitability levels; (ii) a debt/EBITDA ratio of around
3.0x; and (iii) the group's ability to generate positive
FCF. Positive rating pressure could build up if Gerresheimer were
able further grow the business profitably and further reduce leverage
ratios, including achieving a debt/EBITDA ratio of 2.5x on
a sustainable basis. However, an upgrade to Baa3 would also
require further evidence of a balanced financial policy on a long term
basis or a commitment by management to achieve ratios that are in line
with investment-grade levels.
Moody's could consider downgrading Gerresheimer if the group's
profitability were to come under pressure, resulting in negative
FCF and its debt/EBITDA ratio weakening to 3.5x or higher.
Smaller bolt-on acquisitions are incorporated into the rating.
However, negative rating pressure could also build if Gerresheimer
were to engage in larger transactions and fail to return to a debt/EBITDA
ratio of 3.0x in the intermediate term.
Moody's previous rating action on Gerresheimer was implemented on
22 April 2010, when the rating agency (i) affirmed the company's
Ba2 corporate family rating and B1 rating on the EUR126 million worth
of senior subordinated bond issued by Gerresheimer Holdings GmbH;
and (ii) changed the outlook on the ratings to positive from stable.
The principal methodologies used in this rating were Global Packaged Goods
Industry published in July 2009, and Loss Given Default for Speculative-Grade
Non-Financial Companies in the U.S., Canada
and EMEA published in June 2009.
Upgrades:
..Issuer: Gerresheimer AG
.... Probability of Default Rating,
Upgraded to Ba1 from Ba2
.... Corporate Family Rating, Upgraded
to Ba1 from Ba2
..Issuer: Gerresheimer Holdings GmbH
....Senior Subordinated Regular Bond/Debenture,
Upgraded to Ba2, LGD6, 90% from B1, LGD6,
91%
....Senior Subordinated Regular Bond/Debenture,
Upgraded to Ba2, LGD6, 90% from B1, LGD6,
91%
Outlook Actions:
..Issuer: Gerresheimer AG
....Outlook, Changed To Stable From
Positive
..Issuer: Gerresheimer Holdings GmbH
....Outlook, Changed To Stable From
Positive
Headquartered in Duesseldorf, Germany, Gerresheimer AG is
the parent company of the Gerresheimer group, a leading producer
of specialty glass and plastic packaging solutions primarily for the pharmaceutical
and life science industry. The group's revenues in the fiscal
year ending November 2010 amounted to EUR1.02 billion. The
group currently employs approximately 9,500 staff and operates 40
production facilities in Europe, America and Asia. Gerresheimer
AG is publicly listed and 100% of its shares are in free float.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings, public information, and confidential
and proprietary Moody's Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of maintaining
a credit rating.
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
ratings disclosure page www.moodys.com/disclosures on our
website for further information.
Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating 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.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service 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.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Frankfurt am Main
Rainer Neidnig
Asst Vice President - Analyst
Corporate Finance Group
Moody's Deutschland GmbH
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Frankfurt am Main
Matthias Hellstern
Senior Vice President
Corporate Finance Group
Moody's Deutschland GmbH
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SUBSCRIBERS: 44 20 7772 5454
Moody's Deutschland GmbH
An der Welle 5
Frankfurt am Main 60322
Germany
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Moody's upgrades Gerresheimer to Ba1, outlook stable
