Moody's rates Gallery Capital notes Caa1

Moody's Investors Service said it assigned a corporate family rating of prospective Caa1 to Rapsod Trade Ltd. and assigned a prospective Caa1 rating to Gallery Capital SA's $150 million senior secured notes offering.

The outlook is stable for both ratings.

Moody's said the Caa1 ratings incorporate the substantial execution risks associated with the rapid roll-out of Gallery's ambitious acquisition strategy to build the company from a relatively small size as well as the company's considerable debt anticipated as a result of this strategy paired with a considerable level of operating leverage.

Moody's said the ratings also reflect the risk from the limited scale and scope of Gallery's current operations, uncertainties over the possible impact on operating performance as a result of regulatory changes in connection with the ban on tobacco and alcohol advertising and the complexity of Gallery's legal structure.

The agency also cited a degree of cyclicality and seasonality in the company's advertising revenue base, potential competition from larger and better-capitalized operators and exposure to the risks associated with operating in Russia, which is rated Baa2.

More positively, Moody's said the Caa1 ratings recognize Gallery's strong position in the Russian outdoor advertising market and its established relationships with municipalities. The ratings also acknowledge the Russian outdoor advertising market's expected growth rate and management's track-record in building a profitable business in Russia.

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