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June 13 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings says that the planned IPO of Braas Monier Building Group SA (Braas Monier) is credit positive. However, the improvement isnot sufficient to have an impact on its ratings. Fitch rates Braas Monier’s Issuer Default Rating (IDR) at ‘B’ with a Stable Outlook.
The group’s financial profile and liquidity will benefit from a EUR100m primary offering, of which around EUR40m will be used to repay drawings under its existing revolving credit facility (RCF). The remainder will be held as cash on closing and strengthen the group’s liquidity.
Following successful closing of the IPO, Fitch forecasts funds from operations (FFO) adjusted leverage to reduce to well below 5.0x by end-2014. Fitch previously said that failure to improve FFO adjusted leverage to below 5.0x could result in negative rating pressure (see “Fitch Rates Braas Monier’s Senior Secured Notes and Term Loan Final ‘B+”, dated 2 May 2014).
Proceeds from a concurrent secondary offering will not affect the group’s financial profile. Net proceeds to the existing shareholders of around EUR400m to EUR500m will remain entirely outside of the RCF and senior secured notes restricted group.
We do not expect the transaction to trigger any mandatory pre-payment mechanisms in the group’s existing debt documentation. Braas Monier’s net leverage is lower than the 3.25x mandatory prepayment threshold specified in its existing bank agreements. In addition, no change of control will be triggered, as the current owners will maintain control of the group.
Braas Monier continues to benefit from leading market positions in concrete and clay roofing systems. The group’s successful cost-cutting initiatives over the past years will sustainably improve operating leverage. Although we expect only a modest recovery in major end markets, we forecast EBITDA margins to improve to mid-teens over the next 12 to 18 months from 12.9% in FY13 and positive free cash flow from FY15, as restructuring charges abate.