Moody’s rates Rexel notes Ba3

Moody's Investors Service said it assigned a Ba3 rating to Rexel SA's €300 million senior unsecured notes due 2024.

Rexel's Ba2 corporate family rating and Ba2-PD probability of default rating are unaffected, along with the Ba3 ratings on the company's existing senior unsecured notes and the not-prime short-term rating on its €500 million commercial-paper program.

The outlook is stable.

The proceeds of the new notes will be used to redeem in June the remaining $330 million principal outstanding of Rexel's $500 million 5¼% senior unsecured notes due 2020 and related transaction expenses, Moody’s said.

The rating reflects the notes’ pari passu ranking with all other unsecured indebtedness issued by Rexel and their unmitigated structural subordination to non-financial liabilities at the operating companies, the agency explained.

Similar to Rexel's existing senior unsecured notes issued in 2015 and 2016 the new notes will have a light covenant package, Moody’s noted.

Rexel demonstrated resilient sales performance during 2016 despite the adverse impact from the oil and gas exposure in North America and weak macroeconomic environment in some key markets in Europe, the agency said.

Reported revenue declined by 3% year-on-year, but profitability declined further and Moody's adjusted leverage, assisted by debt repayments, stayed flat year-on-year at 5.2x at the end of 2016, positioning it weakly in its rating category, Moody’s said.

But the agency said it expects to see a resumption of top-line growth in 2017 and de-leveraging from its current level, driven by the improvement in profitability.

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