TEXT-Fitch:No immediate rating impact on Renault from Volvo stake disposal
(The following statement was released by the rating agency)
Dec 13 - Fitch Ratings says that the disposal of Renault SA's remaining 6.5% stake in AB Volvo ('BBB'/Stable) has no immediate impact on its Long-term Issuer Default Rating (IDR) and senior unsecured notes rating of 'BB+'. The Outlook on the IDR is Stable.
This EUR1.5bn sale will enable Renault to report a net cash position at end-2012, before Fitch's adjustments for operating leases, and will further bolster the group's liquidity and key credit metrics, including leverage. Renault will use the proceeds of this disposal to reduce financial debt from its automotive operations and finance investments, capex and R&D, hence enhancing growth opportunities.
However, underlying profitability from industrial operations remains somewhat weak for an investment grade rating and may come under pressure in 2013 if the environment deteriorates further. Fitch expects new vehicle sales to contract further in Renault's main European markets in 2013 and the pricing environment to worsen or at best remain stable.
Nonetheless, Fitch believes that the company has sufficient headroom in the current ratings to accommodate the agency's current base assumptions on sales and pricing. In addition, Renault has demonstrated resilient credit metrics in a difficult environment for European volume carmakers in 2011 and 2012. A positive rating action could be considered in the foreseeable future if Fitch believes that the company's current resilient performance will be sustained in 2013.
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