Moody's cuts Edcon, rates notes B3

Moody's Investors Service said it assigned a provisional B3 (LGD4, 59%) rating to the proposed issuance of €325 million equivalent senior secured notes due 2018 by Edcon Holdings (Pty) Ltd.'s main operating subsidiary, Edcon (Pty) Ltd.

The agency also downgraded Edcon's corporate family rating to B3 from B2, its probability-of-default rating to B3-PD from B2-PD.

The outlook is stable.

Proceeds will be used, along with the proposed ZAR 4.12 billion term loan facility due 2017 and the remaining proceeds from the sale of its receivables book to ABSA Bank Ltd., to refinance the €1.18 billion of senior secured notes due April 2014

The proposed senior secured notes will be guaranteed by Edcon, Edcon Acquisition (Pty) Ltd. and Edgars Consolidated Stores Ltd.

The downgrade stems from an assessment that the company's leverage profile has not materially improved over the past year as expected, Dion Bate, a Moody's assistant vice president, said in a statement.

Edcon's pro-forma leverage, excluding the receivables book, is about 7.0x debt to EBITDA.

Moody's said it also is concerned that Edcon will not be able to deleverage as quickly as expected given a more conservative assessment of the EBITDA and free cash flow growth prospects for the business over the next 24 months.

The credit-positive steps taken by Edcon include the sale of its receivables book with proceeds applied to reduce debt and the proposed refinancing of its 2014 notes, the agency noted.

The outlook assumes that the company will focus on growing EBITDA so that leverage, as measured by total debt to EBITDA, trends toward 6.0x.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.