Moody’s upgrades Techem Energy, notes

Moody's Investors Service said it upgraded Techem Energy Metering Service GmbH & Co. KG’s corporate family rating to Ba3 from B1 and probability of default rating to Ba3-PD from B1-PD.

Concurrently, the agency upgraded the rating on the senior subordinated notes due 2020 of Techem to B2 (LGD5) from B3 (LGD6) and the rating on the senior secured notes due 2019 issued by direct subsidiary Techem GmbH to Ba2 (LGD3) from Ba3 (LGD3).

The outlook on all ratings was changed to stable from positive.

"The upgrade reflects Techem's robust performance as well as the steady improvement in credit metrics following the outlook change to positive two years ago," Goetz Grossmann, Moody's lead analyst for Techem, said in a news release.

"Constant growth in earnings over the last three years prompted Techem's leverage as adjusted by Moody's to gradually decline to 4.8x debt/EBITDA in the 12 months ended June 2016 from 5.8x at fiscal year-end March 2013, which is in line with our guidance for an upgrade of below 5x.

“Although free cash flow generation has turned negative since 2015 owing to sizeable profit distributions to shareholders, we acknowledge Techem's resilient and very profitable business model which provides for high earnings and free cash flow visibility.

“The Ba3 rating assumes that Techem will maintain a Moody's-adjusted leverage of well below 5x debt/EBITDA, corresponding to a reported net debt/recurring EBITDA ratio of below 4.5x at fiscal year-end," Grossmann added in the release.

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