Fitch rates Pepco BB, notes BB+

Fitch Ratings said it assigned Pepco Group NV a first-time long-term issuer default rating of BB with a stable outlook. The agency also assigned the outstanding senior secured debt issued by PEU (Fin) Ltd. and PEU (Tre) Ltd. a senior secured rating of BB+ with an RR2 recovery rating and the planned €300 million of senior secured notes to be issued by PEU (Fin) an expected BB+/RR2 senior secured rating.

“The BB IDR reflects Pepco's scale, leading market positions in central and Eastern Europe (CEE), value positioning, improving diversification and record of revenue and profit growth along with adequate leverage for the rating. This is balanced by execution risk from accelerated expansion in Western Europe leading to negative free cash flow (FCF) over the next two years and neutral thereafter, some near-term margin pressure and weak coverage metrics,” Fitch said in a press release.

The outlook reflects an adequate liquidity position to support fast-tracked capital expenditure plans over the next two years, a sizeable part of which is discretionary, combined with EBITDAR leverage steadying at around 4x, the agency said.

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