TEXT-Fitch affirms PagesJaunes at 'B'; outlook negative

Thu Nov 29, 2012 4:59am EST

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(The following statement was released by the rating agency)

Nov 29 - Fitch Ratings has affirmed PagesJaunes' Long-term Issuer Default Rating (IDR) at 'B' and removed it from Rating Watch Negative (RWN). The Outlook is Negative. A full list of rating actions is below.

The successful completion of a refinancing transaction alleviates PagesJaunes' immediate refinancing risk, which was the key driver for Fitch placing the company on RWN on 2 October. While the transaction is credit positive, the company's cash flows are continuing to decline. If the company demonstrates in 2013 it is capable of stopping these declines, the Outlook could be revised to Stable.

KEY DRIVERS

- Completion of Refinancing Transaction

Fitch previously placed the company on RWN due to concerns that it would not be successful in refinancing its 2013 maturities. The successful completion of the refinancing transaction alleviates the immediate refinancing risk that was previously present.

- Pressure on Cash Flows

The company has been investing in additional specialised sales staff in order to further penetrate the French SME segment. Together with the continued decline in the print business, this has caused GOM (PagesJaunes's EBITDA proxy) to decline. Although Fitch understands the rationale for the investment, the agency remains concerned that GOM will not recover in 2013.

RATING SENSITIVITY GUIDANCE:

Positive: Future developments that could lead to positive rating actions include:

- If the company demonstrates that it can stabilise its cash flow declines and Fitch is convinced that this stabilisation is sustainable, the Outlook could be revised to Stable.

Negative: Future developments that could lead to negative rating action include:

- If the company's cash flows continue to decline, then a negative rating action is envisaged.

LIQUIDITY AND DEBT STRUCTURE

The refinancing transaction pushes most of PagesJaunes' large 2013 maturities to 2015, resulting in a more favourable maturity profile for the group. However, the company will now have a significant maturity of EUR1.2bn in 2015. The company generated a pre-dividend free cash flow margin of 18% in 2011, which is strong for the current rating and, aided by the presence of the 3x dividend restrictions, should help the company to deleverage as it approaches this wall of debt.

FULL LIST OF RATING ACTIONS

PagesJaunes Groupe S.A.

Long-term IDR: affirmed at 'B', off RWN, Outlook Negative

PagesJaunes Finance & Co. S.C.A.

Senior secured debt: affirmed at 'BB-'/'RR2', off RWN

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