Fitch rates Rexel notes BB

Fitch Ratings said it assigned an expected senior unsecured rating of BB to Rexel, SA's planned €300 million senior notes issue due in 2024.

The proceeds of the notes will be used for early redemption of the company's 5¼% notes due in 2020.

The planned notes will not be guaranteed, ranking pari passu to all existing and future unsecured indebtedness of the issuer that is not subordinated to the notes, including that under senior credit facilities, Fitch explained.

Although under each of Rexel's bonds and the senior credit facilities creditors only have a claim to the parent company, there is cross-default with additional group debt above a minimum threshold of €100 million, Fitch said.

The agency said it expects average recovery prospects for unsecured bond holders in the event of default, which resulted in a BB rating on the planned bond.

The ratings reflect an expected organic sales recovery for the company in 2017, even though it is only expected to improve to 1.5% by 2019, Fitch said.

The group's organic sales stabilized in the fourth quarter of 2016 after several quarters of declines. Europe returned to growth while Asia and North America sales declined, the agency said.

The company’s Rexel's EBITDA margin remained at less than 5% for the second year in a row, at 4.8%, Fitch added.

However, the agency said it expects this will improve in 2017 to about 5.6% by 2020.

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