Italian Construction Company Salini Assigned 'BB' Rating; Outlook Stable; Notes Rated 'BB-'
- With the amendment of the bank loan signed in December, Italy-based construction company Salini has completed all the steps indicated in its refinancing plan.
- The new financial structure has lengthened the debt maturity, eliminated the security package on the remaining part of the loan financing Salini's acquisition of Impregilo, and set up a committed revolving credit facility.
- We are assigning our 'BB' long-term corporate credit rating to Salini and our 'BB-' issue rating to the company's €400 million senior unsecured notes.
- The outlook is stable, reflecting our view that Salini will likely maintain its credit ratios in line with our assessment of its financial risk profile as "significant" and that its profit margin will gradually improve.
MILAN (Standard & Poor's) Dec. 23, 2013--Standard & Poor's Ratings Services assigned its 'BB' long-term corporate credit rating to Italy-based construction and engineering company Salini S.p.A. The outlook is stable. At the same time, we assigned our 'BB-' issue rating to Salini's €400 million senior unsecured notes maturing in 2018. The recovery rating on the notes is '5', indicating our expectation of modest (10%-30%) recovery for creditors in the event of a payment default. The long-term rating on Salini reflects our view that the company has a "fair" business risk profile and a "significant" financial risk profile, as our criteria define the terms. We consider Salini's business risk profile to be constrained by its exposure to the cyclical and capital-intensive construction market, with its high operational risks. Salini has only limited product diversification in the infrastructure segment, as well as significant exposure to the mature and stagnant Italian market. The company faces high country risks in Africa and South America. Nevertheless, we believe Salini's track record and experience in risk management largely mitigate these risks, as does its consistently higher profitability than peers'. The stable outlook reflects our assessment that Salini's credit metrics, consolidating Impregilo, will be consistent with the company's "significant" financial risk profile at year-end 2013 and slowly improve over 2014 and thereafter. Our base case assumes that Salini will maintain an EBITDA margin of about 8% in 2013 and about 10% in 2014, notwithstanding the weak conditions of the Italian and European economies, thanks to its significant operations outside Europe. We assume that the company will maintain strong risk-control management to minimize the risks of its exposure to projects in emerging-market countries. We expect that Salini will maintain FFO to debt at about 25% in 2013 and that this ratio will improve in the following years. This is in line with a target ratio, which should be maintained in the 20%-30% range for the current rating. We could consider a negative rating action if Salini's group EBITDA falls below 7%, if debt increases due to new acquisitions or a very generous shareholder remuneration policy, and if, as a consequence of these circumstances, the FFO-to-debt ratio falls below 20%. Rating upside potential could build if Salini's group adjusted FFO to debt improved sustainably above 30%, and if Salini demonstrated its capacity to generate steady positive free cash flow. RELATED CRITERIA AND RESEARCH
- Corporate Methodology, Nov. 19, 2013
- Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Nov. 19, 2013
- Corporate Methodology: Ratios And Adjustments, Nov. 19, 2013
- Key Credit Factors For The Engineering And Construction Industry, Nov. 19, 2013
- 2008 Corporate Criteria: Rating Each Issue, April 15, 2008
Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com and at spcapitaliq.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following Standard & Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow 7 (495) 783-4009.
| Primary Credit Analyst: | Barbara Castellano, Milan (39) 02-72111-253; barbara.castellano@standardandpoors.com |
| Secondary Contact: | Anna Stegert, Frankfurt (49) 69-33-999-128; anna.stegert@standardandpoors.com |
| Additional Contact: | Industrial Ratings Europe; Corporate_Admin_London@standardandpoors.com |
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