Ratings
Corporate credit rating, Moody's (25.08.2006)
Moody’s announced a downgrade of the corporate family rating of X5 Retail Group N.V. (Pyaterochka Holding) to B1 from Ba3, with a stable outlook for the rating. Moody’s Interfax Rating Agency also downgraded Pyaterochka’s national scale rating to A1.ru from Aa3.ru.
Moody’s cited the increase in leverage which the company experienced as a result of the merger with Perekrestok as the primary reason for the rating change. Moody’s commented in a statement: “…the rating downgrade primarily reflects the increase in debt of the combined entity as compared to Pyaterochka’s pre-merger metrics...”. In addition, Moody’s noted that “The rating action takes into consideration the positive impact of the merger on the company’s business profile, notably i) market leadership in a still fragmented market, with strong positions in Moscow and St. Petersburg, ii) the increased customer coverage with its dual-format strategy in the food discount and supermarket segments; and iii) the combined entity’s improved ability to capture growth
opportunities in Russia’s fast growing food retail market. In addition, the rating takes into consideration the company history of strong and consistently growing cash flows.”
The outlook for the rating is stable, as Moody’s “anticipates that the company will be able to benefit from its strengthened franchise as the largest food retailer with both discount and supermarket business lines in the Russian market, convert its large investment programme into rapidly growing operating cash flow and significantly improve (its) financial profile within a three-year period, with Debt/EBITDA to be down from its 2006 peak to markedly below 4x in 2009.”
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