Moody's drops Europcar

Moody's Investors Service said it has downgraded the corporate family rating of Europcar Groupe SA to B2 from B1 and the probability of default rating to B2 from B1.

The rating of the company's senior subordinated secured notes was downgraded to B3 from B2 and the rating of its senior subordinated unsecured notes to Caa1 from B3, the agency said.

The outlook remains negative.

"The downgrade reflects Moody's revised expectation that Europcar is unlikely to achieve a reduction in financial leverage in line with its requirements for the B1 rating category over the medium term, in light of a highly leveraged capital structure and based on the company's recent announcement of contracting rental day volumes due to a depressed macroeconomic environment in all of Europcar's key markets," explained Christian Hendker, Moody's lead analyst for Europcar.

"The negative outlook reflects the challenge to avoid a further erosion in credit metrics, in case that the impact of a potential extended drop in rental day volumes on operating margins cannot be fully mitigated by cost reductions, but also considering that Europcar's fleet holding costs may not soften in the short-term, which could add further pressure on margins in the absence of adequate price adjustments."

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