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S&P rates ZF Invest, loan B
S&P said it assigned preliminary B ratings to ZF Invest and its planned 1.382 billion term loan. The loans recovery rating is 3. ZF Invest also plans to secure a 250 million revolver. ZF is the holding company of Prosol Group.
ZF Invest plans to use the proceeds to acquire Grand Frais and to refinance 759 million of debt and to repurchase 741 million of shareholders' payment-in-kind convertible bonds. Following the proposed transaction, reported financial debt would jump to 1.45 billion from 818 million.
The proposed transaction will materially increase ZF Invest's leverage, with S&P Global Ratings-adjusted debt to EBITDA of 7.4x-8.1x (or 6.6x-7.2x when excluding the shareholders' convertibles) over fiscal years 2021-2022 (ending Sept. 30), and high expansionary capital expenditure (capex) will constrain free operating cash flow (FOCF), S&P said in a press release.
The outlook is stable. The outlook reflects the view that, ZF Invest will achieve substantial growth thanks to new store openings, the development of its online platform, and strong like-for-like revenue growth, while keeping adjusted EBITDA margins near 9%-10% and improving adjusted leverage with debt to EBITDA under 8x (or below 7x when excluding the convertibles) by 2023, the agency said.
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