Score Motion: Moody’s downgrades OHL’s PDR to Ca-PD, affirms Caa3 instrument rankings and Caa2 CFR
World Credit score Analysis – 26 Jan 2021
Frankfurt am Foremost, January 26, 2021 — Moody’s Traders Service (“Moody’s”) has right this moment downgraded to Ca-PD from Caa2-PD the likelihood of default score (PDR) of Spanish building firm Obrascon Huarte Lain S.A. (“OHL” or “group”). Concurrently, Moody’s affirmed the group’s Caa2 company household score (CFR) and the Caa3 instrument rankings on its senior unsecured notes due 2022 and 2023. The outlook on all rankings stays destructive.
The downgrade of the PDR to Ca-PD from Caa2-PD displays OHL’s announcement of a deliberate restructuring of its capital construction, which — if executed as contemplated — can be seen by Moody’s as a distressed trade, which might indicate a average loss for its present bond holders. On the anticipated closing of the transaction in Could this yr, Moody’s will append the “LD” designation to the PDR.
OHL’s excellent senior unsecured notes (E323 million excellent due March 2022 and E270 million excellent due March 2023) have been affirmed at Caa3, reflecting the anticipated average loss to bond holders following the proposed transaction. The unsecured notes are contractually subordinated to the group’s secured debt consisting primarily of a syndicated financial institution mortgage (E95 million drawn on the finish of 2020). As well as, Moody’s views commerce payables as being unlikely to be affected in a consensual restructuring situation and thus rating in actual fact senior to the notes. The notes stay, due to this fact, rated one notch beneath the CFR, which Moody’s has affirmed at Caa2.
The proposed transaction will end in a debt discount of round E105 million (assuming full consent to the restructuring from present bond holders) via a mix of a write-off of the present notes, a conversion to fairness and into new senior secured notes with maturities in 2025 and 2026, to be issued by a brand new entity (New OHL).
Moody’s regards the transaction, which may result in a average loss for present bond holders (estimated at 10% by the issuer), as a way for the group to handle the refinancing of the upcoming maturities and to keep away from a disorderly default on its present debt construction, which Moody’s considers unsustainable. Additionally a part of the transaction types the contribution of as much as E71 million of fairness into the corporate by OHL’s shareholders, of which E35 million via a capital enhance and an as much as E36 million personal placement to the Amodio household and Tyrus Capital, who’ve dedicated to take a position E37 million and E5 million, respectively.
Upon completion of the transaction, which is deliberate by Could 2021, Moody’s endeavors to revisit the score positioning of OHL in its then new authorized type with an anticipated strengthened shareholder construction, steadiness sheet and leverage metrics on the proposed debt discount and maturity extension.
RATIONALE FOR OUTLOOK
The destructive outlook displays the opportunity of a downgrade if the proposed debt restructuring couldn’t be executed as deliberate, leading to a persistently unsustainable capital construction with growing threat of a disorderly default with a probably decrease restoration for collectors.
FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS
The rankings on OHL may very well be downgraded ought to the group default on its debt obligations, or if restoration expectations on OHL’s debt devices have been to additional weaken.
An improve of OHL’s rankings is unlikely earlier than the execution of its debt restructuring, upon which Moody’s will have in mind the group’s anticipated strengthening steadiness sheet and leverage metrics, mixed with the progress in its working efficiency.
The principal methodology utilized in these rankings was Development Trade revealed in March 2017 and out there at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1061454. Alternatively, please see the Score Methodologies web page on www.moodys.com for a replica of this technique.
Headquartered in Madrid, OHL is certainly one of Spain’s main building teams. The group’s actions embody (1) its core engineering and building enterprise (together with industrial and providers divisions), and (2) concessions growth in recognized core markets in Europe, North America and Latin America. Within the 12 months ended 30 September 2020, OHL reported gross sales of round E2.9 billion and E78 million of EBITDA.
For additional specification of Moody’s key score assumptions and sensitivity evaluation, see the sections Methodology Assumptions and Sensitivity to Assumptions within the disclosure type. Moody’s Score Symbols and Definitions will be discovered at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.
For rankings issued on a program, sequence, class/class of debt or safety this announcement gives sure regulatory disclosures in relation to every score of a subsequently issued bond or notice of the identical sequence, class/class of debt, safety or pursuant to a program for which the rankings are derived completely from present rankings in accordance with Moody’s score practices. For rankings issued on a help supplier, this announcement gives 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 rankings from the help supplier’s credit standing. For provisional rankings, this announcement gives sure regulatory disclosures in relation to the provisional score assigned, and in relation to a definitive score which may 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 score in a way that might have affected the score. For additional info please see the rankings 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 rankings could change because of this credit standing motion, the related regulatory disclosures will probably 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.
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Regulatory disclosures contained on this press launch apply to the credit standing and, if relevant, the associated score outlook or score overview.
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The World Scale Credit score Score on this Credit score Score Announcement was issued by certainly one of Moody’s associates exterior the UK and is endorsed by Moody’s Traders 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 offered on www.moodys.com.
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Goetz Grossmann, CFA Vice President - Senior Analyst Company Finance Group Moody's Deutschland GmbH An der Welle 5 Frankfurt am Foremost 60322 Germany JOURNALISTS: 44 20 7772 5456 Shopper Service: 44 20 7772 5454 Christian Hendker, CFA Affiliate Managing Director Company Finance Group JOURNALISTS: 44 20 7772 5456 Shopper Service: 44 20 7772 5454 Releasing Workplace: Moody's Deutschland GmbH An der Welle 5 Frankfurt am Foremost 60322 Germany JOURNALISTS: 44 20 7772 5456 Shopper Service: 44 20 7772 5454
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