Ranking Motion: Moody’s assigns B2 ranking to Goldstory SAS, outlook secure
World Credit score Analysis – 25 Jan 2021
Paris, January 25, 2021 — Moody’s Buyers Service (“Moody’s”) has at the moment assigned a B2 company household ranking (CFR) and a B2-PD likelihood of default ranking to Goldstory SAS, the father or mother firm of French jeweller THOM Group (THOM). Moody’s has additionally assigned a B2 ranking to the E600 million assured senior secured notes consisting of a hard and fast charge and a floating charge tranche to be issued by Goldstory SAS. The outlook for Goldstory SAS is secure.
Concurrently, Moody’s has withdrawn the B3 CFR and the B3-PD likelihood of default ranking of THOM Group. The ranking of the senior secured financial institution credit score facility at THOM has been upgraded to B2 from B3. Please consult with the Moody’s Buyers Service Coverage for Withdrawal of Credit score Rankings, out there on its web site, www.moodys.com
The outlook for THOM Group has been modified to secure from unfavorable.
“The B2 ranking elements within the resilience of THOM’s earnings and cashflow, which regardless of the coronavirus epidemic had been higher than Moody’s anticipated in 2020, and its reasonably leveraged capital construction after the refinancing,” stated Vincent Gusdorf, Vice President-Senior Credit score Officer and lead analyst for THOM. “Regardless of the November lockdown in France, THOM’s reported EBITDA remained secure throughout the October-December 2020 interval, 1 / 4 throughout which the corporate generates the vast majority of its earnings, and this due to this fact offers better monetary flexibility for fiscal 12 months 2021.”
The personal fairness funds Bridgepoint and Qualium, which at present maintain 59% and seven% of THOM, respectively, will promote their stakes. Concurrently, the personal fairness fund Altamir will improve its possession to 56% from 25%, with the remaining stakes owned by administration (20%), two household workplaces and some people.
Goldstory SAS, a holding firm sitting above THOM, will concern E600 million of senior secured notes to finance the change in possession. The proceeds, together with E144 million of money and E360 million of fairness, will finance an acquisition worth of E520 million and refinance E565 million of the corporate’s current debt.
THOM’s earnings and money circulate had been extra resilient than Moody’s anticipated in fiscal 2020. This has resulted in Moody’s assigning a B2 CFR to Goldstory SAS, a B2 ranking to its E600 million senior secured notes and upgrading the ranking of the senior secured financial institution credit score facility at THOM to B2 from B3. Although THOM’s shops had been closed for a number of months, income fell by solely 9% on a like-for-like foundation, to E670 million. Earnings had been way more secure than Moody’s anticipated, with Moody’s-adjusted EBITDA down by simply 3% to E202 million (together with working leases). THOM considerably lower its prices, notably its workers and hire bills. Because of this, its Moody’s-adjusted debt/EBITDA elevated to solely 5.3x in fiscal 2020 from 4.8x in fiscal 2019, whereas THOM’s earlier B3 ranking assumed that leverage would spike to 6x-7x.
The B2 ranking can be supported by THOM’s good efficiency throughout the Christmas interval, which normally accounts for many of its earnings. THOM generated E76 million of reported EBITDA (excluding working leases) throughout the October-December 2020 interval, an analogous stage in comparison with the earlier 12 months, regardless of the November lockdown.
Moody’s-adjusted gross debt will stand at E1.1 billion in fiscal 2021 (ended on 30 September), comprising notably the E600 million of senior secured notes and E450 million of working leases. In distinction, gross debt stood at E884 million in fiscal 2020. Moody’s expects THOM to be well-positioned within the B2 ranking class, with Moody’s-adjusted debt/EBITDA forecast at about 5x in fiscal 2021, though the continued pandemic creates many uncertainties.
THOM’s liquidity is ample professional forma the refinancing. Though anticipated money at closing is just E25 million, it should have entry to a E90 million absolutely undrawn revolving credit score facility (RCF) maturing in 2025. There isn’t a important time period debt maturity till 2026 when the senior secured notes will mature. This liquidity stage covers the corporate’s massive working capital necessities ensuing from the excessive seasonality of THOM’s and Stroili’s operations, notably due to Christmas gross sales and promotional durations. Peak drawing beneath the RCF tends to happen between October and early December, reflecting the vacation season’s stock buildup.
Following the refinancing, Moody’s has moved the CFR to Goldstory SAS’ stage, which stands now on the high of the restricted group, from THOM Group’s stage. The capital construction features a tremendous senior RCF of E90 million maturing in August 2025 which is able to change the prevailing RCF and time period mortgage B and E600 million of senior secured notes maturing in 2026, which Moody’s charges B2, in step with the CFR.
Our evaluation elements within the assumption that the guarantor protection will quantity to no less than 90% of THOM’s income and EBITDA. The tremendous senior RCF and the senior secured notes are secured by share pledges, financial institution accounts, intragroup receivables and important mental property. Nonetheless, there are substantial limitations on the enforcement of the ensures and collateral beneath French regulation. The tremendous senior RCF shall get precedence over enforcement proceeds because of the intercreditor settlement.
The likelihood of default ranking of B2-PD displays using a 50% household restoration assumption, reflecting a capital construction comprising bonds and financial institution debt with free covenants.
RATIONALE FOR THE STABLE OUTLOOK
The secure ranking outlook displays Moody’s expectation that THOM will keep its excessive revenue margin and constructive free money circulate (FCF) technology, regardless of the potential for new lockdowns due to the coronavirus pandemic. Moody’s forecasts that gross sales will enhance in fiscal 2021 and leverage will development in direction of 5x in consequence.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The ranking company might improve THOM if it achieves a Moody’s-adjusted debt/EBITDA trending in direction of 4.5x on a sustained foundation. A constructive ranking motion would additionally require a considerable improve in Moody’s-adjusted FCF, underpinned by higher-than-expected income development, in addition to a transparent dedication to sustaining credit score ratios commensurate with a better ranking.
Conversely, the ranking company might downgrade THOM if its Moody’s-adjusted debt/EBITDA considerably exceeds 5.5x on a sustained foundation. Moody’s might additionally decrease THOM’s ranking if its Moody’s-adjusted FCF turns into unfavorable for a chronic interval, on account of weakened working efficiency or higher-than-expected capital spending. A pointy deterioration in financial or sanitary circumstances, leading to working circumstances worse than these in fiscal 2020, might additionally set off a downgrade.
The principal methodology utilized in these scores was Retail Trade revealed in Could 2018 and out there at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1120379. Alternatively, please see the Ranking Methodologies web page on www.moodys.com for a replica of this system.
Headquartered in Paris, France, Goldstory SAS is among the main jewelry and watch retail chains in Europe, with E670 million of income in fiscal 2020. THOM’s enterprise mannequin depends on straight operated shops, principally situated in buying malls. Its most important banners — Histoire d’Or, Marc Orian and Stroili — have a long-established historical past in France and Italy as generalist jewelry retailers. As of 30 September 2020, the corporate straight operated 1,005 shops and 4 e-commerce web sites.
For additional specification of Moody’s key ranking assumptions and sensitivity evaluation, see the sections Methodology Assumptions and Sensitivity to Assumptions within the disclosure kind. Moody’s Ranking Symbols and Definitions may be discovered at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For scores issued on a program, sequence, class/class of debt or safety this announcement offers sure regulatory disclosures in relation to every ranking of a subsequently issued bond or notice of the identical sequence, class/class of debt, safety or pursuant to a program for which the scores are derived completely from current scores in accordance with Moody’s ranking practices. For scores issued on a help supplier, this announcement offers sure regulatory disclosures in relation to the credit standing motion on the help supplier and in relation to every specific credit standing motion for securities that derive their credit score scores from the help supplier’s credit standing. For provisional scores, this announcement offers sure regulatory disclosures in relation to the provisional ranking assigned, and in relation to a definitive ranking that could be assigned subsequent to the ultimate issuance of the debt, in every case the place the transaction construction and phrases haven’t modified previous to the project of the definitive ranking in a fashion that may have affected the ranking. For additional info please see the scores tab on the issuer/entity web page for the respective issuer on www.moodys.com.
For any affected securities or rated entities receiving direct credit score help from the first entity(ies) of this credit standing motion, and whose scores could change on account of this credit standing motion, the related regulatory disclosures will likely be these of the guarantor entity. Exceptions to this strategy exist for the next disclosures, if relevant to jurisdiction: Ancillary Companies, Disclosure to rated entity, Disclosure from rated entity.
The scores have been disclosed to the rated entity or its designated agent(s) and issued with no modification ensuing from that disclosure.
These scores are solicited. Please consult with Moody’s Coverage for Designating and Assigning Unsolicited Credit score Rankings out there on its web site www.moodys.com.
Regulatory disclosures contained on this press launch apply to the credit standing and, if relevant, the associated ranking outlook or ranking assessment.
Moody’s normal rules for assessing environmental, social and governance (ESG) dangers in our credit score evaluation may be discovered at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.
At the very least one ESG consideration was materials to the credit standing motion(s) introduced and described above.
The World Scale Credit score Ranking on this Credit score Ranking Announcement was issued by one in every of Moody’s associates exterior the UK and is endorsed by Moody’s Buyers Service Restricted, One Canada Sq., Canary Wharf, London E14 5FA beneath the regulation relevant to credit standing companies within the UK. Additional info on the UK endorsement standing and on the Moody’s workplace that issued the credit standing is accessible on www.moodys.com.
Please see www.moodys.com for any updates on adjustments to the lead ranking analyst and to the Moody’s authorized entity that has issued the ranking.
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Vincent Gusdorf, CFA VP - Senior Credit score Officer Company Finance Group Moody's France SAS 96 Boulevard Haussmann Paris 75008 France JOURNALISTS: 44 20 7772 5456 Consumer Service: 44 20 7772 5454 Jeanine Arnold Affiliate Managing Director Company Finance Group JOURNALISTS: 44 20 7772 5456 Consumer Service: 44 20 7772 5454 Releasing Workplace: Moody's France SAS 96 Boulevard Haussmann Paris 75008 France JOURNALISTS: 44 20 7772 5456 Consumer Service: 44 20 7772 5454
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