Nov 23 - Fitch Ratings has affirmed Osprey Acquisitions Limited's (Osprey)
Long-term Issuer Default Rating (IDR) at 'BB' and senior secured rating at
'BB+'. The Outlook for the Long-term IDR is Stable. Fitch has also affirmed the
bond issued by Anglian Water (Osprey) Financing Plc (AWOF) at 'BB+' senior
secured. The bond is guaranteed by Osprey, and is thus rated in line with
Osprey's senior secured rating of 'BB+'.
The rating affirmation reflects the strong cash flow characteristics and
adequate financial flexibility of Anglian Water Services Limited (Anglian Water,
see "Fitch Affirms Anglian Water's Senior Secured Debt at 'A'/'BBB+'", published
on 23 November 2012, at www.fitchratings.com), the main operating subsidiary of
the group, as well as the structurally and contractually subordinated nature of
the holding company financing at Osprey level.
AWOF is the financing vehicle for Osprey, which is a holding company for
businesses focused on the water sector, including ownership of Anglian Water - a
regulated water and wastewater business.
- Dividend Receipts Support Debt Service:
Fitch calculates Osprey's FYE12 pension-adjusted net debt/regulatory asset value
(RAV) at 89.2%, dividend cover at 7x and post-maintenance and post-tax interest
cover (PMICR) at around 1.17x. Fitch forecasts for the remainder of the price
control period gearing at or below 90%, dividend cover in the range of 3.5x-4.0x
and PMICR in the range of 1.1x-1.2x. These forecast metrics remain in line with
Osprey's Long-term IDR of 'BB'. Dividend cover, the credit ratio which best
captures the ability of the group to service holding company obligations,
provides for a comfortable buffer in comparison to the ratio guideline of
RATING SENSITIVITY GUIDANCE:
Negative: Future developments that could lead to negative rating action include:
A sustainable drop of dividend cover below 2.5x would lead to negative rating
action. Similarly, an increase in group gearing above 90% or drop of PMICR below
1.1x would attract additional scrutiny from Fitch.
A marked deterioration in operating and regulatory performance of Anglian Water
or adverse changes to the regulatory framework in the UK water sector could lead
to negative rating action.
Positive: Future developments that could lead to positive rating actions
A fundamental reduction in target gearing would be required for positive rating
action to occur.
LIQUIDITY & DEBT STRUCTURE
- Adequate Back-Up Liquidity
As of 31 March 2012, Osprey held GBP55.2m in cash and AWOF had available GBP25m
of undrawn, committed bank facilities with a maturity in November 2015. This is
sufficient to bridge short-term liquidity needs. For debt service, Osprey and
AWOF effectively rely on upstream cash flows from their operating subsidiaries,
primarily Anglian Water.
Additional information is available on 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.
Additional information is available on www.fitchratings.com. For regulatory
purposes in various jurisdictions, the supervisory analyst named above is deemed
to be the primary analyst for this issuer; the principal analyst is deemed to be
Applicable criteria, 'Corporate Rating Methodology', dated 8 August 2012, are
available at www.fitchratings.com.
Applicable Criteria and Related Research:
Corporate Rating Methodology