Moody’s gives Europcar tap issue B3

Moody's Investors Service said it affirmed Europcar Groupe SA's corporate family rating of B1 and probability of default rating of B1-PD.

Concurrently, the agency assigned a B3 instrument rating to its new €125 million senior notes tap due 2022 and affirmed the B3 instrument rating on the €475 million senior notes due 2022.

Moody’s also affirmed the B2 instrument rating on the €350 million senior secured notes due 2021 issued by EC Finance plc.

The outlook on all ratings is stable.

Net proceeds from the tap issuance will be used to fund Europcar's further organic and acquisitive growth strategy. Pro forma for the €125 million new tap issuance, Europcar's adjusted leverage at the end of 2015 increases to 4.2 times, from 3.9 times actual (gross leverage as adjusted by Moody's).

The increase in financial leverage as a result of the tap issuance, although only small, is a credit negative and further strengthens Moody's expectation of limited deleveraging prospects in the context of revenue growth and growing fleet base to be funded by drawings under the asset-backed fleet financing.

In addition, the B1 corporate family rating reflects Europcar's: (a) Exposure to the cyclical and highly competitive car rental sector; (b) heavy reliance on capital market access to fund its seasonal fleet purchases; and (c) moderate scale, relative to its direct peers, with limited operations outside of Europe, the agency said.

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