Moody’s rates Hurtigruten notes B2

Moody's Investors Service said it assigned a B2 corporate family rating and a B2-PD probability of default rating to Silk Bidco AS, a holding company owning all of the shares of Hurtigruten ASA, and a provisional B2 rating (LGD4, 56%) to the proposed €455 million of senior secured notes due 2022 to be issued by Silk Bidco. The outlook is positive.

Silk Bidco will use the proceeds from the proposed issuance to repay the bridge facility put in place by TDR Capital, which was used in conjunction with the equity contribution to purchase Hurtigruten and to repay its existing debt.

The agency said the B2 corporate family rating is constrained by Hurtigruten's small scale and narrow business profile being essentially focused on the Norwegian west coast cruise market, its high operational leverage and low profitability and its highly leveraged capital structure.

However, Moody’s said the rating is balanced by Hurtigruten's well-established competitive positioning and differentiated offer in the niche Norwegian cruise market, its good forward-looking revenue visibility and growing customer base and its positive free cash flow generation, reflecting improving profitability and limited capital requirements.

The positive outlook reflects Moody's expectation that Hurtigruten will improve its profitability supported by growth in cruise night volumes, higher ticket revenues and the materialization of cost saving initiatives. It also reflects Moody's expectations of good deleveraging prospects.

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