Fitch downgrades Dufry

Fitch Ratings said it downgraded Dufry AG’s issuer default rating and Dufry Finance SCA’s senior unsecured notes to BB- from BB.

The outlook is negative.

Fitch also said it assigned an expected rating of BB- to Dufry Finance’s new senior unsecured notes of up to CHF 1.1 billion with an expected maturity of eight years.

The senior unsecured notes, including the new issuance, are rated as the same level as the company’s issuer default rating, ranking equally among themselves and the new and existing term loans, the agency said.

The actions follow news that Dufry plans to acquire World Duty Free Group, which is subject to shareholder- and anti-trust approvals, Fitch said, and reflect the resultant increase in leverage and operational risk to the company.

A simultaneous integration of two transformational acquisitions such as World Duty Free and Nuance, which together equal Dufry on a stand-alone basis, materially increases the execution risks, the agency said.

Unsuccessful or delayed integration of the new operations could lead to earnings and cash-flow margin dilution, weakening Dufry’s operational profile and materially impacting its ability to de-leverage, Fitch added.

The agency said, however, that it acknowledges the compelling industrial logic behind the acquisition and the strong credit-enhancing impact it will have on Dufry’s business profile through scale-driven efficiencies.

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