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