Fitch Ratings has assigned
A full list of rating actions is below.
The group's new fixed- and floating-rate notes with an aggregate principal of
Assemblin Caverion's 'B' Long-Term Issuer Default Rating (IDR), which has also been affirmed, reflects Fitch's expectation of high leverage and expected limited deleveraging over the next four years. It also reflects the group's improved business profile following the completed acquisition of
Key Rating Drivers
Rating Limited by Leverage: Assemblin Caverion's rating remains constrained by Fitch's expectation of high leverage and expected limited deleveraging of about 1.1x by end-2027. We expect total Fitch-defined debt to rise to about
Improved Business Profile: The recent transformative acquisition of
The overall solid business profile remains supported by sound diversification in services and end-markets, a fairly high share of contracted revenue with increased exposure to revenue from services relative to projects and a sound industry outlook. The Nordic installation market benefits from solid demand from energy-efficiency projects, smart buildings and urbanisation trends. Demand for the group's services is further supported by a regulatory environment targeting low emissions.
Integration Risk: Fitch expects heightened integration risk due to the scale of the
Lower but Improving Margins: We expect a gradual improvement in operating profitability in 2025-2027, following about a 1pp decline in Fitch-defined EBITDA margin to about 6.1% in 2024 due to the acquisition of
Positive FCF Through-the-Cycle: We expect the combined group to continue to generate positive free cash flow (FCF) through the cycle. We assume muted FCF margins of about 1pp in 2024-2025, due mainly to one-off integration and restructuring costs, before they rise to about 2.5%-3% in 2026-2027. The improvement will be driven by higher operating margins, sound working capital management and low capex requirements that are partly offset by high interest payments.
Acquisitive Growth Strategy: Fitch expects that Assemblin Caverion will continue its active M&A strategy with total cumulative bolt-on acquisitions of about
Derivation Summary
Assemblin Caverion compares favourably with other major Nordic installation and service providers, due to its larger combined scale and strong market positions in its prioritised local markets.
Within the Fitch-rated universe, we view the group's business profile as stronger than
Assemblin Caverion's financial profile is stronger than that of
Key Assumptions
Key Rating Assumptions Within Our Rating Case for the Issuer:
About 1% revenue decline in 2024, and low single-digit annual organic revenue growth in 2025-2027
About 1pp EBITDA margin decline in 2024, followed by about a 20bp annual margin gain in 2025-2027
Working capital requirement at 0.5% of revenue in 2024 and 0.1% annually in 2025-2027
Capex at 0.4% of revenue in 2024-2027
M&A spend of about
Recovery Analysis
The recovery analysis assumes that Assemblin Caverion would be reorganised as a going-concern (GC) in bankruptcy rather than liquidated
We have assumed a 10% administrative claim
The GC EBITDA estimate for the combined group of
An EV multiple of 5.5x is used to calculate a post-reorganisation valuation. It mainly reflects the group's solid growth prospects, strong market position and high barriers to entry that are partly offset by its fairly low operating margins relative to peers'.
We assume the group's post-notes issue debt structure to comprise its
We do not view its pension guarantee facility of
Based on the proposed capital structure, our waterfall analysis generates a ranked recovery for the senior secured noteholders in the 'RR4' category, leading to a 'B(EXP)' rating for the proposed
The recovery analysis for the existing notes was based on the group's perimeter excluding
The waterfall analysis output for the existing notes generated a ranked recovery in the 'RR4' band, indicating an instrument rating of 'B', which is in line with the IDR. The waterfall analysis output percentage on current metrics and assumptions was 37%.
RATING SENSITIVITIES
Factors That Could, Individually or Collectively, Lead to Positive Rating Action/Upgrade:
EBITDA gross leverage below 5.0x on a sustained basis
Successful integration of
FCF margin above 2% on a sustained basis
Successful M&A improving scale and/or market position without negatively affecting credit metrics
Factors That Could, Individually or Collectively, Lead to Negative Rating Action/Downgrade:
Unsuccessful M&A resulting in an EBITDA margin of less than 5% on a sustained basis
EBITDA gross leverage above 6.0x on a sustained basis
EBITDA interest coverage below 2x on a sustained basis
Lack of consistently positive FCF generation
Liquidity and Debt Structure
Sufficient Liquidity: We estimate Assemblin Caverion's liquidity post-notes issue to mainly consist of about
No Material Near-Term Maturities: The group has no significant short-term debt maturities as its debt structure is dominated by long-dated senior secured notes. The group's existing
Issuer Profile
Assemblin Caverion is a Swedish-based leading Nordic provider of multi technical services and installation across the Nordics, with a foothold in
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
MACROECONOMIC ASSUMPTIONS AND SECTOR FORECASTS
Click here to access Fitch's latest quarterly Global Corporates Macro and Sector Forecasts data file which aggregates key data points used in our credit analysis. Fitch's macroeconomic forecasts, commodity price assumptions, default rate forecasts, sector key performance indicators and sector-level forecasts are among the data items included.
ESG Considerations
The highest level of ESG credit relevance is a score of '3', unless otherwise disclosed in this section. A score of '3' means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. Fitch's ESG Relevance Scores are not inputs in the rating process; they are an observation on the relevance and materiality of ESG factors in the rating decision. For more information on Fitch's ESG Relevance Scores, visit https://www.fitchratings.com/topics/esg/products#esg-relevance-scores.
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