S&P lifts Verisure, rates Verisure Midholding B+

S&P said it raised the long-term corporate credit rating on Verisure Holding AB to B+ from B.

The agency also said it assigned a B+ long-term corporate credit rating to Verisure Midholding AB, the group's reporting entity.

S&P said it raised the rating on Verisure's senior secured debt to B+ from B. The recovery rating of 3, indicating 50% to 70% expected default recovery.

S&P also said it raised the rating on the senior unsecured debt to B- from CCC+. The recovery rating of 6 indicates 0 to 10% expected default recovery.

The outlook is stable.

The upgrades reflect Verisure's strong performance over the past 12 months and an expectation that its revenue, EBITDA and credit ratios will continue to strengthen in the coming years, despite relatively modest free operating cash flow, S&P said.

The agency also said it equalized the rating on Verisure Holding with that on Verisure Midholding because it is considered a core entity under the agency’s group rating methodology.

Verisure is expected to continue posting double-digit growth, fueled by its increasing customer base, given still-low penetration of the European alarm-monitoring market and improving average revenue per user (ARPU) through additional product offerings, S&P said.

The company’s adjusted EBITDA margin, which was 39% in the first half of 2016 compared with 35.8% in 2015, will reach 40% over the next 12 months thanks to gains from operational scale and successful implementation of cost-cutting programs, the agency added.

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