First time rating
Frankfurt am Main, November 30, 2012 -- Moody's Investors Service has today assigned a B1 Corporate Family rating and a B1 probability of default rating to HellermannTyton Alpha S.à.r.l as well as a provisional (P)B2 rating to EUR215 million of senior secured guaranteed notes to be issued by HellermannTyton Finance PLC, a UK-based finance vehicle, guaranteed by HellermannTyton Alpha Sàrl. The outlook on all ratings is stable.
The assignment of a definitive rating on the EUR215 million senior secured guaranteed notes is subject to a review of the associated documentation.
Moody's issues provisional ratings in advance of the final sale of securities, and these ratings only represent Moody's preliminary opinion. Upon a conclusive review of the transaction and associated documentation, Moody's will endeavor to assign definitive ratings to the securities. A definitive rating may differ from a provisional rating.
The B1 corporate family rating is mainly supported by (i) HellermannTyton's strong market positions in the cable management solutions market, (ii) the company's good margin levels both as measured by EBITDA margin and Return on Assets, (iii) the relatively high barriers to entry to HellermannTyton's markets through the capital intensity of the business, the long-standing customer relationship of the group, the very broad based products portfolio (70,000 SKUs) and the technological content of certain of its products, (iv) the absence of major customer concentration with the 15 largest customers accounting for approximately 33% of group turnover, (v) the group's ability to generate Free Cash Flow in different economic environments, (vi) the group's relatively moderate leverage as illustrated by an estimated pro-forma adjusted Debt/EBITDA ratio of around 2.6x, and (vii) the group's experienced management team.
The rating of HellermannTyton remains constrained by (i) the group's relatively small size with revenues of EUR474 million in 2011, (ii) a geographical concentration on developed economies with Europe and the Americas accounting for 56% and 24% of turnover respectively notwithstanding that the company has limited exposure to Southern Europe and some of the turnover realized in Europe is ultimately exported by customers of HellermannTyton to emerging markets, (iii) the group's exposure to cyclical end industries, (iv) the company's capital intensity due to the high automation level of its production asset base notwithstanding that HellermannTyton's capital expenditures have been significantly above depreciation levels over the last three years to 30 September 2012, (v) the group's relatively high operating leverage partly due to the group's large sales force although it has to be noted that the company has a strong track record in reducing costs during period of economic weakness.
HellermannTyton's liquidity profile pro-forma of the refinancing will be adequate. The company will have EUR31 million of cash & marketable securities on balance sheet and access to an undrawn EUR80 million revolving credit facility pro-forma of the closing of the refinancing. Alongside the group's expected operating cash flow generation (pre-Working capital) this should be more than sufficient to fund all operating needs of the group mainly consisting of working cash (estimated at approximately 3% of revenues), working capital requirements and capex. The company's revolver will include one net leverage financial covenant with ample headroom at closing of the transaction.
The stable outlook reflects Moody's expectation that HellermannTyton's operating performance and cash flow generation will remain in line with the historical performance of the last three years (until the last twelve months to 30 September 2012) in the short to medium term. The stable outlook also assumes that the capital structure of the group will not be leveraged up from current levels through more aggressive financial policies and external growth initiatives. Finally the stable outlook assumes that the company will maintain a sound liquidity profile going forward.
The provisional (P)B2 rating assigned to the proposed EUR215 million senior secured guaranteed bonds, which is one notch below the corporate family rating, reflects the relatively large size of the EUR80 million super senior revolving credit facility compared to the overall indebtedness of the group pro-forma of the proposed refinancing.
Moody's would consider upgrading the rating if HellermannTyton could reduce leverage as measured by Debt/EBITDA to below 2.5x on a sustainable basis (around 2.6x pro-forma of the refinancing) as well as maintaining FCF/Debt in the mid single digits.
Negative pressure on the rating would develop if Debt/EBITDA would increase above 3.5x on a sustainable basis and / or if free cash flow generation would become negative leading to a deterioration of the liquidity position of the group.
The principal methodology used in rating HellermannTyton Alpha S.à.r.l and HellermannTyton Finance PLC was the Global Manufacturing Industry Methodology published in December 2010. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.
Established in 1930, HellermannTyton is a global leading manufacturer and distributor of cable management systems and solutions including fastening, identifying, insulating, protecting, organizing, routing and connectivity. The company operates 11 manufacturing plants, employs over 3,000 people, generated revenues of EUR474 million and an EBITDA of EUR93 million in 2011.
HellermannTyton is owned by UK-based private equity firm Doughty Hanson, which acquired the business from Spirent in 2006 in a primary LBO.
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Stanislas Duquesnoy VP - Senior Credit Officer Corporate Finance Group Moody'sDeutschland GmbH An der Welle 5 Frankfurt am Main 60322 Germany JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Matthias Hellstern Managing Director Corporate Finance Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Deutschland GmbH An der Welle 5 Frankfurt am Main 60322 Germany JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.
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