Today, Nordic Credit Rating (NCR) assigned its 'B' long-term and 'N-3' short-term issuer credit ratings to Cabonline Group Holding AB (publ) (Cabonline), a Swedish taxi and technology company operating in Sweden, Norway, Finland and Denmark. Cabonline's senior secured debt was rated 'B'.
The rating affirms a preliminary credit rating assigned 6 Nov 2019 which was contingent on the successful placement of a SEK 1.8bn senior secured bond, and review of the final documentation.
"Since our preliminary credit rating, Cabonline has successfully issued the proposed bond albeit at a higher interest rate and with stricter covenants than initially proposed, reflecting the risk appetite and weak credit metrics in the company," says Mille O. Fjeldstad, credit analyst at Nordic Credit Rating. "The rating further reflects the company's finalised post-bond liquidity situation and our expectation of continued stable cash flow for both the company and market."
Rating rationale
Our 'B' long-term credit rating on Cabonline reflects the company's large share of Business to Public (B2P) contracts, well-known brands and significant number of drivers across the Nordic region. The rating is constrained by the company's weak credit metrics, low operating margins and high risk appetite. We adjust the rating downwards by one notch to reflect the company's concentrated funding structure, negative consolidated equity position, financial sponsor ownership as well as uncertainties about shifting regulations.
Outlook
The stable outlook reflects our expectation of stable growth in the Nordic taxi market with public contracts remaining a steady source of income for Cabonline. It reflects our expectations of a stable operating margin driven by the company's focus on cost improvements and operating efficiency.
Potential positive rating drivers:
- Increased earnings, improving overall credit metrics, or reducing future need for debt financing
- Improved operating margins
Potential negative rating drivers:
- Lack of improvements in leverage ratio for coming tightening of covenants
- Reduced share of public contracts
- Market disruptions resulting in decreasing margins
Analyst contact details:
Mille O. Fjeldstad, +47 99 03 89 16, mille.fjeldstad@nordiccreditrating.com
Sean Cotten, +46 735 600 337, sean.cotten@nordiccreditrating.com
The methodology documents used for this rating are NCR's Corporate Rating Methodology and Rating Scales published 14 Aug. 2018 and Rating Principles published 16 Sep. 2019. For the full regulatory disclaimer please see the rating report which can be downloaded at nordiccreditrating.com/ratings-research/research.