On 6 Nov. 2019, Nordic Credit Rating (NCR) assigned its preliminary 'B(P)' long-term and 'N-3(P)' short-term issuer credit ratings to Cabonline Group Holding AB (publ) (Cabonline), a Swedish taxi and technology company operating through the four Nordic countries; Sweden, Norway, Finland and Denmark. Cabonline's senior secured debt was rated 'B(P)'.
Our preliminary rating is contingent on the successful placement of a SEK 1.8bn senior secured bond within 90 days of the publication of this report. After successful debt placement the rating will be finalized following a review of the final documentation. Should the placement be unsuccessful or differ from our expectations, the final ratings could differ from the preliminary ratings, or be withdrawn. All ratings, subscores and assessments cited in this report are preliminary.
Rating rationale
Our 'B(P)' preliminary long-term 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 large risk appetite. We adjust the rating downwards by one notch to reflect the company's concentrated funding structure, potential disruptions to operations Denmark, 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 further reflects our expectations that the company's Finnish operations will stabilise with a reduction of own-owned cars.
Potential positive rating drivers:
- Increased earnings, improving overall credit metrics, or reducing future need for debt financing
- Improved operating margins
Potential negative rating drivers:
- Reduced share of public contracts
- Market disruptions resulting in decreasing margins
- Reputational concerns affecting market position
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.