S&P rates Getronics loans

Standard & Poor's said it assigned its B+ senior secured debt rating and a recovery rating of 4 to the new €175 million credit facilities of Getronics NV (B+/positive/--).

"The recovery rating of 4 indicates our expectation of marginal recovery, in the 25% to 50% range, of principal in the event of default and primarily reflects the nature of the security package, which is limited to a pledge of the shares in Getronics Nederland BV," said S&P credit analyst Anne-Charlotte Pedersen. "Although there is limited provision of upstream guarantees by certain operating subsidiaries, substantial priority liabilities at operating levels mean that we consider the share pledge to have limited value."

Although the EBITDA base is not expected to deteriorate below 2003 levels, two or three years of negative free cash flow generation could gradually erode the group's current cash balance and leave it vulnerable to swings in working capital requirement in excess of the €100 million revolving facility, potentially causing a hypothetical default toward the end of 2006, the agency said.

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