Moody's rates new Vendex notes Ba3

Moody's Investors Service said it assigned a prospective Ba3 rating to Royal Vendex KBB's proposed new €200 million issue of senior subordinated notes due 2010 and assigned a Ba1 senior implied rating.

The outlook is stable.

Moody's said the senior subordinated notes will be contractually subordinated to Vendex's recently signed €550million three-year revolving credit facility though it will rank pari passu with trade creditors. Bond holders will benefit from senior subordinated upstream guarantees from Vendex's operating companies, which at signing will account for at least 75% of aggregate EBITDA and 80% of the consolidated tangible assets of the group as at end of fiscal 2002.

Any material subsidiary that becomes a new guarantor of the €550 million senior bank facility would also become a subordinated guarantor of the notes.

The indenture relating to the notes contains certain covenants, which restrict total debt, subject to a minimum fixed charge cover ratio to be met on the incurrence of additional debt with the exception of carve outs including €270 million to cover letters of credit, short term uncommitted money market drawings and daylight overdraft exposure of which Moody's expects the daylight overdraft exposure to account for between €180-200 million of the total.

Moody's said it views Vendex to be no more than satisfactorily positioned in the rating category. The agency will continue to monitor Vendex's progress in turning around the V&D Department store format. Any unexpected problems in engineering the turn around could put the rating under pressure.

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