Moody’s eyes SUSE for downgrade

Moody’s Investors Service said it placed SUSE SA’s B1 corporate family rating and the B1-PD probability of default rating on review for downgrade. Concurrently, the agency placed on review for downgrade the B1 rating of the loans issued by Marcel BidCo LLC, Marcel Bidco GmbH and Marcel Lux Debtco Sarl. The outlook has been changed to ratings under review from stable.

The review follows EQT AB, which owns SUSE’s majority shareholder Marcel LUX III Sarl, announcing on Aug. 17 it plans to take SUSE private. Marcel controls about 79% of SUSE’s shares. The company entered into a transaction framework agreement with Marcel, which includes paying shareholders an interim dividend of up to €584 million, assuming 100% acceptance.

Under the agreement, any added borrowing will be done by the SUSE group for up to €500 million in loans. The amount borrowed will be determined after the expiry of the offer acceptance period.

The review reflects the expected deterioration in SUSE’s credit metrics, Moody’s said.

“The transaction also signals a willingness to tolerate higher leverage at the same time as the company faces weaker than expected growth during fiscal year ending in October 2023 as highlighted by the recent second-quarter profit warning issued on May 10, 2023, which in turn weakens Moody's visibility in terms of the trajectory of revenue, EBITDA and cash flow generation in the coming quarters,” the agency said in a press release.

Moody’s said it aims to resolve the review after it has more clarity on SUSE’s future capital structure, expected in the next two to three months.

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