The stable outlook reflects our view that Edwards will generate moderately positive FOCF in 2013 and report largely stable revenues and margins year on year. It also factors in our expectation that Edwards' adjusted gross debt-to-EBITDA ratio in 2013 is likely to remain at about 4x.
We could consider raising the rating if Edwards maintained a conservative financial policy, including an adjusted gross debt-to-EBITDA ratio of about 3x and generation of sizable FOCF through the cycle. A more diverse revenue mix and less volatile margins would also likely support ratings upside.
Ratings downside could materialize if Edwards' credit metrics or liquidity were to deteriorate significantly from their current levels. Although not likely in our view at this stage, such a scenario could result from large shareholder distributions, a substantial industry downturn, or sizable acquisitions beyond the group's existing footprint of products and services. In particular, we would view negative FOCF generation of more than GBP30 million on a 12-month basis as not in line with the current rating.
Related Criteria And Research
All articles listed below are available on RatingsDirect on the Global Credit Portal, unless otherwise stated.
-- Criteria Methodology: Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
-- Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
-- Key Credit Factors: Methodology And Assumptions On Risks In The Global High Technology Industry, Oct. 15, 2009
-- Criteria Guidelines For Recovery Ratings On Global Industrials Issuers' Speculative-Grade Debt, Aug. 10, 2009