Moody's downgrades Kleopatra

Moody's Investors Service said it downgraded the corporate family rating and probability of default rating of Kleopatra Lux 1 Sarl to Caa2 and Caa3, respectively, from Caa1.

The outlook remains negative.

Moody's said the action reflects the possibility of a financial restructuring becoming increasingly likely as the group's debt load appears very high, as indicated by debt/EBITDA of above 10x as of September.

Although operating profitability with a Moody's adjusted EBITDA margin of around 11% in the past financial year, ending September 2011, was solid and was even slightly enhanced on the back of a moderate volume recovery, benefits from extensive restructuring measures and additional capacity added, cash generation was negative due to high capex and restructuring costs.

In addition, Moody's said the current weak macroeconomic outlook makes it rather unlikely that, going forward, the company will be able to enhance profit generation sufficiently to allow it to effectively de-lever.

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