Fitch affirms Safilo Capital

Fitch Ratings said it affirmed the CCC+ rating for Safilo Capital International SA's €300 million senior notes due 2013. At the same time the agency affirmed parent company Safilo S.p.A.'s senior unsecured rating at B and its senior secured rating at B+. The short term rating is B.

The outlook remains negative.

Safilo's performance in 2003, albeit admittedly very poor, was in line with Fitch's expectations. Sales for the year to December 2003 were marginally up on 2002, EBITDA at €132 million decreased by about 25% year over year. As of first quarter 2004, EBITDA for the last 12 months fell to a low of €124 million.

Nevertheless the company has shown some signs that a recovery in profitability is underway, driven particularly by improving sales in the United States and continuously strong demand in Europe, with the only notable exception being Italy. If figures for Q2 and Q3 2003 confirm this trend, the pressure on the ratings should gradually ease.

"Although execution risks remain, particularly in areas of cost control and market share, the company appears to have started a gradual recovery which should accelerate in the second half of the year. The results of the next two to three quarters will provide an indication as to whether the company will return to a more stable financial profile," said Stefano Podesta of Fitch. "However, should we perceive that a return to positive free cash flows will fail to materialise within a reasonable time horizon, the company ratings are likely to be revised downward."

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