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CREDIT RATING: ZFF (Ba1*-/BB+/NR): Moody’s Review for Downgrade

CREDIT RATING
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  • Moody’s put ZFF on review for downgrade late Friday. It follows an outlook negative from S&P in August. It expects the potential downgrade to be limited to one notch.
  • The move follows a second profit warning from the parts maker in September, pressuring margin and FCF metrics.
  • It now expects EBITA margins towards 3% this year, with a ratings floor at 5% which it believes will be challenging to achieve in 2025.
  • It sees leverage at 4x at FY25 following repayment of maturing bonds, already refinanced. 3.5x is the floor for the rating.
  • RCF/ND below mid-teens or FCF below -€500mn are the relevant cash flow thresholds. Moody’s expects -€1bn FCF this year before returning to positive in 2025.
  • ZFF has been looking at an IPO of Lifetec and recently completed an internal carve-out. The EV was reported at €3-4bn back in April, but the valuation has clearly been impaired since. Nonetheless this is an important potential deleveraging event. It doesn’t resolve the margin problem, however.
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  • Moody’s put ZFF on review for downgrade late Friday. It follows an outlook negative from S&P in August. It expects the potential downgrade to be limited to one notch.
  • The move follows a second profit warning from the parts maker in September, pressuring margin and FCF metrics.
  • It now expects EBITA margins towards 3% this year, with a ratings floor at 5% which it believes will be challenging to achieve in 2025.
  • It sees leverage at 4x at FY25 following repayment of maturing bonds, already refinanced. 3.5x is the floor for the rating.
  • RCF/ND below mid-teens or FCF below -€500mn are the relevant cash flow thresholds. Moody’s expects -€1bn FCF this year before returning to positive in 2025.
  • ZFF has been looking at an IPO of Lifetec and recently completed an internal carve-out. The EV was reported at €3-4bn back in April, but the valuation has clearly been impaired since. Nonetheless this is an important potential deleveraging event. It doesn’t resolve the margin problem, however.