EM CEEMEA CREDIT: VESTL: Fitch downgrade
Jun-05 13:01
Vestel Elektronik - Fitch Downgrade
(VESTL: Caa1neg/-/B-neg)
- Two notch down grade by Fitch from B+ to B- with outlook remaining on negative. We have previously highlighted the serious weakness in Vestel credit (see link: https://mni.marketnews.com/4dF908b) and find it difficult to see how the company can continue to service its ST debt with even more expensive ST debt.
- Fitch highlights the usual margin deterioration, coverage ratios and liquidity concerns as we have also done. However, the agency expects adj EBITDA margins to improve to 7.2% at the end of FY25, while adj leverage to remain elevated at 7.6x at the end of 2025.
- Co. calculated leverage at the end of 2024 was 6.8x, which exceeded covenant levels of 3.5x on the USD500mn bond. The agency believes the company still has room to raise further debt under the bond documentation.
- We think the key is not to raise further expensive debt that the company can’t afford to service but to restructure the business with potential asset sales or equity injection.
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