Moody's cuts Europcar view to negative

Moody's Investors Service said it confirmed Europcar Groupe SA's Ba3 corporate family rating, B1 subordinated secured notes and B2 senior subordinated notes and changed the outlook to negative.

This concludes the review for possible downgrade begun on Nov. 16 following Europcar's announcement of its plans to acquire the European businesses of Vanguard.

The confirmation follows the announcement that U.K. regulatory approval for the acquisition has been obtained and reflects Moody's view that the acquisition of Vanguard's European operations will lead to improvements in Europcar's business risk profile and that financial ratios will not be materially weakened as a result.

However, the agency said the negative outlook takes account of the ongoing challenges facing the company in improving its credit metrics given the integration risks, Europcar's limited absolute scale compared to its international car rental peers, its relatively weak debt protection measures, the prospect of increasing debt levels in line with a further expansion of the fleet size, fleet purchase conditions that may be burdened by a need to further diversify fleet composition and the recent plans of some volume manufacturers to cut back their sales to rental car companies and the challenges associated with the penetration of the replacement rental market and the international rental car markets.

Europcar's Ba3 corporate family rating is supported by the company's strong brand and market position in the key European rental car markets, a solid degree of regional diversification, relatively stable operating performance levels through the cycle, a significant degree of cost structure flexibility and the relative sound financial profiles of the majority of Europcar's diversified car supplier base, Moody's said.

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