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Investing.com -- Moody’s Ratings has downgraded Mobico Group PLC’s long-term corporate family rating to B2 from Ba2, with a negative outlook.
The rating action, announced Monday, concludes the review for downgrade initiated on May 9 and reflects expectations of slower debt reduction following Mobico’s April 25 announcement of the disposal of its North American School Bus operations.
According to Moody’s, the sale will generate cash proceeds well below expectations, meaning potential debt reduction won’t fully offset the reduced scale and geographic diversity resulting from the disposal. The rating agency noted that while the sale will reduce future capital expenditure, significant operational uncertainties remain, particularly regarding regulatory changes in Mobico’s Spanish Long Haul operations.
Mobico’s gross debt to EBITDA ratio stood at 7.2x as of December 31, 2024, down from 10.9x in 2023. Moody’s projects leverage will reduce to around 6.0x-6.5x over the next two years, with interest coverage improving to 0.8x-1x over the same period.
The Spanish operations currently generate the bulk of Mobico’s earnings. A Sustainable Mobility Law remains under Parliamentary review and is not expected to be approved before the end of 2025. By the end of 2027, all the company’s Long Haul concessions in Spain will undergo renewals.
On the positive side, Moody’s highlighted Mobico’s good track record in renewing concessions, lower capital expenditure needs, strengthened liquidity position following the upcoming disposal, and its substantial 95% unencumbered owned bus fleet.
Mobico had £245 million in cash at the end of 2024 and expects to receive £280 million net proceeds from the US school bus business sale early in the third quarter of 2025. The company has access to committed revolving credit facilities totaling £600 million, fully available at the end of 2024.
The £500 million Perpetual Subordinated Non-Call Fixed Rate Reset Notes were downgraded to Caa1 from B1, with Moody’s assuming these notes will remain in the capital structure, nearly doubling interest expenses due to the coupon step up.
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