Moody's may downgrade Europcar

Moody's Investors Service said it placed the Ba3 corporate family rating, B1 subordinated secured notes and B2 senior subordinated notes of Europcar Groupe SA on review for possible downgrade.

The review was prompted after Europcar announced plans to acquire the European businesses of U.S. car rental group Vanguard (rated B1). The agency said its review will evaluate if expected improvements in Europcar's business profile and cash flow generation ability are in line with the increased absolute financial debt, given that Europcar's debt protection measures before the transaction - with a debt-to-EBITDA ratio of 5.6x expected for 2006 - have been weak for the Ba3 corporate family rating category.

Moody's said it expects the acquisition will improve Europcar's position in relation to several factors such as scale, market position, diversification and the ability to improve the cost structure due to synergy potential.

On the other hand, the transaction could result in higher absolute debt levels requiring greater visibility of stable cash flow generation of the acquired business, the agency added.

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