Our 'BBB' long-term issuer rating on Axfast AB (publ) (Axfast) is unchanged following a correction regarding NCR's adjustment for the company's operating leases.
NCR's Corporate Rating Methodology, published 14 Aug. 2018, includes adjustments for operating lease commitments and costs. NCR considers operating lease obligations in its evaluation of a company's net debt and operating lease costs in its evaluation of net interest costs. Axfast, which reports according to Swedish Generally Accepted Accounting Principles, is exposed to costs for its site leasehold agreements, which are treated as operating lease assets and liabilities and financial costs under International Financial Reporting Standards 16 (IFRS 16). Although Axfast does not report under IFRS 16, the present value of the site leasehold agreements should nonetheless have been included in our calculation of adjusted net debt and adjusted property values. Similarly, the site leasehold fees should have been added back to EBITDA and added to adjusted interest expenses.
These adjustments negatively impact credit metrics for loan to value – projected to be 19.7% at end-2020 compared with 18.9% in the previous version – and EBITDA to net interest – projected to be 4.4x at end-2020 compared with 5.8x in the previous version. The relative impact on interest coverage is affected by the company's low interest-bearing debt and interest costs and is expected to exceed 5x in 2021 and 2022. The corrections positively impact the projection for EBITDA margin, which rises to 68% from 64.5% previously.
These changes have no impact on our credit ratings, outlook, key rating drivers or rating subfactors for Axfast.
Please find the corrected initial rating report and rating action report here.
This commentary does not constitute a rating action.
Analyst contact details:
Mille O. Fjeldstad, +47 990 389 16, mille.fjeldstad@nordiccreditrating.com
Sean Cotten, +46 735 600 337, sean.cotten@nordiccreditrating.com