(The following statement was released by the rating agency)
Aug 02 -
Overview
-- Sweden-based bus services provider Nobina AB has announced a temporary deferral of the coupon and principal repayments on its EUR85 million senior secured notes due on Aug. 1, 2012, until Oct. 31, 2012.
-- We view the deferral, and Nobina's inability to meet its original obligations under the notes in full and on time, as a default under our criteria.
-- Therefore we are lowering our long-term corporate credit rating on Nobina to 'SD' (Selective Default) from 'CC' and our issue rating on the senior secured notes to 'D' (Default) from 'CC'.
Rating Action
On Aug. 2, 2012, Standard & Poor's Ratings Services lowered to 'SD' (Selective Default) from 'CC' its long-term corporate credit ratings on Sweden-based bus services provider Nobina AB and its subordinate holding company Nobina Europe Holding AB.
At the same time, we lowered to 'D' (Default) from 'CC' our issue rating on the senior secured notes issued by Nobina's finance subsidiary Nobina Europe AB. The recovery rating on the notes is '4', indicating our expectation of average (30%-50%) recovery for senior secured lenders in the event of a payment default.
Rationale
The downgrades follow Nobina's announcement of the deferral of interest and principal repayments due on its EUR85 million senior secured notes on Aug. 1, 2012, until Oct. 31, 2012. We view the deferral, and Nobina's inability to meet its original obligations under the notes in full and on time, as a default under our criteria.
We understand that Nobina is in advanced discussions with noteholders regarding an exchange offer to refinance the notes and has received support from almost all noteholders for an exchange. We understand from the company that discussions on the final terms of this refinancing remain ongoing.
Under the proposed refinancing, if Nobina has cash exceeding a certain threshold, a 9.125% coupon will be paid in cash on the new notes. However, if cash balances are below the threshold, the coupon will be 11.125% payment in kind. In addition, under the terms of the new notes, noteholders will benefit from a cash sweep, subject to certain conditions, which will replace the existing amortization feature.
We aim to reassess our ratings on Nobina following the successful completion of the proposed refinancing.
Prior the announced deferral, Nobina launched a note exchange offer on July 2, 2012, and subsequently updated the timeline for acceptance of this offer on July 6, and again on July 13, 2012. Under our criteria, we viewed this exchange offer as a distressed restructuring. As such, it would still have led to a default of the notes and the selective default of Nobina and Nobina Europe Holding, had it been successfully executed prior to the notes' Aug. 1, 2012, maturity date. We understand that Nobina had received support for the exchange offer from noteholders representing more than 80% of the notes outstanding. However, the minimum acceptance level for the exchange was 98%. Under the exchange offer, noteholders would have been able to exchange their holdings at par (EUR85 million) for EUR97 million (Swedish krona 860 million) of new notes due Dec. 31, 2014.
Liquidity
We assess Nobina's liquidity position as "weak" under our criteria. This is mainly due to the shortfall associated with the maturity of the EUR85 million notes. Nobina has announced a deferral of the interest and principle due on the notes, but we understand that this is a short-term solution to provide time to complete the refinancing. As such, we currently forecast a shortfall between uses and sources of cash over the 12 months to Feb. 28, 2013.
Over the 12 months to Feb. 28, 2013, we calculate total sources of liquidity of about SEK700 million, comprising:
-- SEK90 million of unrestricted cash;
-- SEK256 million available under a revolving receivables discounting facility. We understand that this expires in October 2012, and as such do not consider it in our analysis; and
-- Our forecast of unadjusted funds from operations of SEK360 million-SEK420 million.
We forecast uses of approximately SEK1.5 billion over the period, including:
-- SEK1.5 billion of debt and capital expenditure (capex). Nobina's short-term debt maturities include the EUR85 million senior secured notes, as well as approximately SEK650 million of finance lease payments.
Cash balances, internal operating cash flows, and the receivables discounting facility are Nobina's only liquidity sources, absent available committed credit facilities. We anticipate that Nobina will fund the majority of the capex, which pertains to financial leases for new buses.
We understand that there are no maintenance financial covenants in the documents relating to Nobina's debt.
Recovery analysis
The issue rating on Nobina Europe AB's EUR85 million senior secured notes maturing on Aug. 1, 2012, is 'D'. The recovery rating on the notes is '4', indicating our expectation of average (30%-50%) recovery for senior secured lenders in the event of a payment default.
Related Criteria And Research
All articles listed below are available on RatingsDirect on the Global Credit Portal, unless otherwise stated.
-- Rating Implications Of Exchange Offers And Similar Restructurings, Update, May 12, 2009
-- How Standard & Poor's Uses Its 'CCC' Rating, Dec. 12, 2008
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
Ratings List
Downgraded
To From
Nobina AB
Nobina Europe Holding AB
Corporate Credit Rating SD CC/Negative/--
Nobina Europe AB
Senior Secured Debt* D CC
Recovery Rating 4 4
*Guaranteed by Nobina Europe Holding AB.
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Source: http://www.thebestrates.com/2012/08/02/text-sp-cuts-nobina-to-sd-on-notes-deferral/
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