Moody's rates Cirsa notes Ba3

Moody's Investors Service said it assigned a prospective Ba2 senior implied rating to Cirsa Business Corp. SA. Concurrently, Moody's assigned a prospective Ba3 rating to the proposed issue of €260 million in senior notes due 2014 to be issued at Cirsa Finance Luxembourg SA.

The unsecured issuer rating for Cirsa is prospective B1.

The outlook is stable.

Moody's said the ratings consider the company's significant and growing exposure to emerging market risk, notably Argentina (sovereign foreign currency debt ceiling at Caa1), where €15 million of the bond proceeds will be invested, expected pressure on consolidated cash flows over the short to medium term as a result of the company's investment plans, and the continued need for management to adequately integrate and consolidate the business, particularly as continued asset acquisitions will remain core to Cirsa's strategy.

The ratings also reflect a lack of independence in the company's corporate governance and shareholder structure, controlled by Cirsa's founder and family members, and volatility in the company's manufacturing and interactive divisions, subject to intense competition and uncertain demand, which have been the subject of recent intangible write-downs.

Positively, the ratings also incorporate Cirsa's clear leadership of the fragmented Spanish gaming market, and the company's role as a key consolidator in slot machines and bingo halls, a strong growth and profitability track record since its inception in 1978, including a proven ability to withstand difficult operating conditions (e.g. the Argentine crisis) and generate material free cash flows, favorable fundamentals of the Spanish gaming market, which should provide a stable platform for growth, favorable credit metrics, with total debt/EBITDA and EBITDA/net cash interest expected to be sustainably below 3.0x and above 5.0x, respectively, going forward, and a rational growth strategy, building on the company's core strengths, track record, and management expertise.

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