Moody’s lowers HSS notes

Moody's Investors Service said it affirmed Hero Acquisitions Ltd.’s (HSS) B1 corporate family rating and B1-PD probability of default rating.

Concurrently, the agency downgraded the instrument rating on the £136 million outstanding senior secured notes maturing in 2019 issued by HSS Financing plc, a subsidiary of HSS, to B2 from B1.

The outlook was changed to negative from stable.

"The change of outlook reflects: (1) HSS' adjusted leverage which has remained at an elevated level since 2015, (2) the moderate de-leveraging prospects for the business over the next 12 months in the context of a high level of competition and Moody's expectation of a slowing gross domestic product (GDP) growth in the United Kingdom (UK), and (3) the relatively weaker liquidity position with limited headroom under the revolving credit facility (RCF)," Sebastien Cieniewski, Moody's lead analyst for HSS, said in a news release.

The downgrade of the instrument rating on the senior secured notes to B2 reflects: (a) The large amount of revolver ranking ahead; (b) Moody's expectation that a significant portion of this RCF will remain drawn for a prolonged period of time due to the projected limited free cash flow (FCF) generation; and (c) the overall higher risk profile of the group compared with that at the time of the initial public offering (IPO) due to the increased leverage, the agency added.

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