EU TRANSPORTATION: Mobico | Moody's on-review for downgrade (x3)

(MCGLN; Ba2 On-Review Dwg now/NR/BBB- Stable)

We have had a lot of questions since the asset sale on leverage implications - the confusion was that it was positive because an asset sale flagged for deleveraging must be.

For the future: one does not need a financial model to answer questions like this. An asset sale's implication for leverage, if you assume full cash sale proceeds are kept on the balance sheet or used for debt-paydowns, can simply be assessed on if the asset is sold for a higher or lower multiple (EV/EBITDA) than the group's current leverage (Net Debt/EBITDA).

If we take Mobico as an example:

• The quoted 5.0x EV/EBITDA multiple for the North America business included future earn-outs. Excluding it the real multiple was closer to 4.4x, versus group leverage in the mid-to-high 4x area.
• That 4.4x still includes debt-like items like deferred capex — which wouldn’t normally be part of a net debt calc.
• If you instead only count upfront cash proceeds ($375m) and leased liabilities removed ($38m IFRS16), you’re down to a 3.9x EV/EBITDA multiple — well below current leverage.
• Cross-check: Mobico itself said the sale was leverage neutral (buried deep in the presser). But it reports leverage at 2.8x, excluding the hybrid. So that confirms to you that the sale was / is leverage negative when including the hybrid.