Nov 29 - Fitch Ratings has assigned Finmeccanica Finance SA's 4.375%,
EUR600m bond, due in 2017, a senior unsecured rating of 'BBB-'. The bond is
issued under Finmeccanica S.p.A.'s (Finmeccanica) EUR3.8bn EMTN
programme and is unconditionally and irrevocably guaranteed by Finmeccanica. The
rating is in line with Finmeccanica's long-term Issuer Default Rating (IDR) of
'BBB-'. The Outlook on Finmeccanica's Long-term IDR is Negative.
The proceeds from the bonds are expected to be used to partially refinance
existing debt. The guarantee from Finmeccanica is a direct, general and
unconditional obligation of the company and will at all times rank at least
equally with all its other present and future unsecured and unsubordinated
obligations. Terms and conditions also include standard events of default, but
no financial covenants or triggers.
Finmeccanica Finance is a wholly-owned subsidiary of Finmeccanica and is
incorporated as a societe anonyme under Luxembourg law. The sole purpose of the
company is to hold equity participations and to raise finance to be on-lent to
companies in the Finmeccanica group.
The current ratings of Finmeccanica reflect its good core business profile,
strong market positions in defence electronics and helicopters, improving
geographical diversity, a healthy order backlog (2.5 times last-12-months
revenue at end-Q312), an increased focus on less cyclical defence and security
businesses and adequate liquidity position.
The ratings are restricted by a weak financial profile for the present rating,
characterised by poor cash flow generation and debt service coverage ratios as
well as high leverage and the presence of a number of non-performing assets
which are negatively impacting the performance of the group and which the
company is trying to divest.
The Negative Outlook on the Long-term IDR reflects Fitch's concerns about the
timeliness of the closing of the sales of the non-core assets, the continuing,
albeit reduced, risks involved in completing the restructuring plan announced in
Q411, and the currently weak defence spending environment in Finmeccanica's key
markets, which may affect business growth assumptions in the short to medium
RATING SENSITIVITY GUIDANCE:
Negative: Future developments that could lead to negative rating actions
- Funds from operations (FFO) based lease adjusted gross leverage above 3.5x
- FFO margin below 10% by 2013
- Negative free cash flow (FCF) beyond 2012
- Further material cash restructuring charges
- Significant adverse findings in the corruption investigation pertaining to
present members of management.
Positive: Future developments that could lead to positive rating actions
Whilst an upgrade to the current ratings is unlikely in the short term, a
revision of the Outlook to Stable would be possible if the company executes its
asset disposal programme and applies the proceeds towards net debt repayment and
continues to improve its cash generation in line with Fitch's expectations.
Additional information is available at www.fitchratings.com. The ratings above
were solicited by, or on behalf of, the issuer, and therefore, Fitch has been
compensated for the provision of the ratings.
Applicable criteria, "Corporate Rating Methodology" dated 8 August 2012 are
available at www.fitchratings.com.
Applicable Criteria and Related Research:
Corporate Rating Methodology