PARIS, December 12, 2022 — Moody’s Investors Service (“Moody’s”) is pleased to announce that the Sani/Ikos Group SCA (Sani/Ikos or the Company) and the Company Guarantee issued by Sani/Ikos Financial Holdings 1 Sarl. , a Caa1 rating on the €300 million senior collateralized bonds issued. The outlook for both companies has been changed from stable to pending review.
A complete list of all impacted ratings can be found at the end of this press release.
“The rating downgrade review reflects increased leverage following the acquisition by GIC Private Limited (GIC) in October 2022, offsetting the company’s strong performance throughout 2022. It also reflects the uncertainty about the company’s performance in 2018. Rising inflation, weakening consumer sentiment and uncertainty around future leveraged demand have led to a large part of its key growth strategy It’s debt-financed,” said Elise Savoye CFA, vice president and senior analyst at Moody’s and principal analyst at Sani/Ikos.
Rating Rationale / Factors That May Lead to Rating Upgrades or Downgrades
The review of the downgraded rating of Sani/Ikos Group SCA (Sani/Ikos or the Company) reflects a significant increase in leverage following the acquisition of the company by GIC, which is expected to be approximately 10.5x by the end of 2022. The company’s expansion plans will remain largely funded by additional debt. The B3 rating was initially positioned weakly in the B3 rating category. Moody’s expected the leverage to gradually decrease due to the potential for additional revenue from development and expansion. A cash distribution of €250m and additional funding raised against the backdrop of the group’s assets suggest a desire for higher leverage. The review found the company’s historically strong performance in the luxury resort segment in Greece and Spain and its profitable operating model (high EBITA margin of 23.5% over the last 12 months to September 2022). However, we are also taking into account the deterioration of the business environment. It has proven resilient to the pandemic and the crises in Russia and Ukraine.
This review will (1) focus on future leverage demand after the GIC acquisition in order to keep the leverage index in line with Moody’s expectations for the B3 level; (2) the company’s ability to deploy growth strategies to significantly increase earnings and deliver consistently strong operating margins; (3) a review of liquidity and plans to fund significant capital expenditures; and (4) potential support from major shareholders to support the company as needed.
Environmental, social and governance (ESG) considerations
Sani/Ikos’ credit impact score (CIS-4, very negative) largely reflects its willingness to leverage and concentrated ownership. The company is exposed to high environmental risks due to physical climate risks and moderate carbon migration risks. Its moderate social risk exposure reflects customer relationship risks associated with managing customer data and reputation.
Factors leading to rating downgrades
– Reinstatement of effective travel restrictions caused by the pandemic
– Debt/EBITDA will be well over 10x in 2022 and well over 8x in 2023
– EBITA margin did not recover above 20%
An upgrade is unlikely given the rating is under review for downgrade.
structural considerations
The debentures are structurally subordinated to the liabilities of subsidiaries and subordinated to all liabilities secured by property and partial corporate guarantees. The Caa1 rating pending downgrade of the secured bond reflects the subordination of the bond.
The company also uses a preferred stock certificate with 100% equity credit given its equity-like characteristics in line with the hybrid equity credit methodology.
Liquidity
Sani/Ikos has ample liquidity after the debt issuance, but we expect free cash flow to remain negative in 2023 and 2024. The exercise has reduced the 2023 and 2024 debt service needs, so that the annual debt service needs remain manageable (less than €40 million per annum) until the 2026 bond maturity.
ESG considerations
We take into account the impact of environmental, social and governance (ESG) factors when assessing a company’s creditworthiness. Our major shareholder is her GIC along with the company’s founder and management team. The ownership structure makes it more tolerant of leverage. Sani/Ikos GP manages Sani/Ikos Group SCA and has full control over the company’s operations.
List of impacted ratings
Under review for downgrade:
..Published by: Sani / Ikos Financial Holdings 1 Sa rl
….BACKED senior secured senior notes pending downgrade, currently Caa1
.. Published by: Sani/Ikos Group SCA
…. Probability of default rating, pending downgrade, now B3-PD
…. LT Corporate Family Rating pending downgrade, now B3
Outlook action:
..Published by: Sani / Ikos Financial Holdings 1 Sa rl
….outlook, changed rating from stable to under review
.. Published by: Sani/Ikos Group SCA
….outlook, changed rating from stable to under review
Main methodology
The main methodology used in these ratings will be published in November 2021, https://ratings.moodys.com/api/rmc-documents/356424Alternatively, see our Rating Methodology page. https://ratings.moodys.com For a copy of this methodology.
Company Profile
Sani/Ikos operates 2,750 rooms and suites in 10 luxury hotels in Greece and Spain under the Sani and Ikos brands. While Sani Resort is a fully integrated resort in one location, the group’s Ikos concept comprises luxury all-inclusive hotels in various locations. The company is currently working to open four more hotels in Greece, Spain and Portugal, adding another 1,578 rooms between 2023 and 2025. The hotel is open throughout the extended summer season. In 2021, the group made his €213 million earnings, which is on par with his 2019 earnings.
Regulatory disclosure
For more information on Moody’s key rating assumptions and sensitivity analysis, please refer to the “Methodological Assumptions” and “Sensitivity to Assumptions” sections of the Disclosure Form. Moody’s rating symbols and definitions are: https://ratings.moodys.com/rating-definitions.
With respect to a rating issued on a program, series, category/class of debt or securities, this announcement does not imply that each rating issued on any subsequent bond or bond in the same series, category/class of debt, security or rating is issued. Programs derived solely from existing ratings in accordance with Moody’s Rating Practices. With respect to ratings issued to support providers, this announcement clarifies the specific regulatory requirements associated with each credit rating action on the support provider and each specific credit rating action on securities that derive credit ratings from the support provider’s credit rating. provide disclosure. With respect to provisional ratings, this announcement provides specific regulatory disclosures in connection with the provisional ratings assigned and in connection with any definitive ratings that may be assigned following final issuance of the debt. provide. Before assigning a final rating in any way that affects the rating. See the respective issuer’s issuer/transaction page for more information. https://ratings.moodys.com.
For affected securities or rated entities that receive direct credit support from the principal entity in this Credit Rating Action and whose ratings may change as a result of this Credit Rating Action, the relevant Regulatory disclosures are disclosures of the assurance entity. Exceptions to this approach exist for the following disclosures, as applicable to the jurisdiction: Ancillary Services, Disclosures to Rated Entities, and Disclosures from Rated Entities.
Ratings are disclosed to the rated entity or its designated agent and are issued without modification due to such disclosure.
These ratings are solicited. Please refer to our policy on assigning and assigning unsolicited credit ratings on Moody’s website. https://ratings.moodys.com.
The regulatory disclosures contained in this press release apply to credit ratings and, if applicable, to related rating outlooks or rating reviews.
Moody’s General Principles for Evaluating Environmental, Social and Governance (ESG) Risks in Credit Analysis can be found at: https://ratings.moodys.com/documents/PBC_1288235.
At least one ESG consideration was material to the credit rating actions announced and described above.
The global credit ratings in this Credit Ratings Announcement are issued by one of Moody’s affiliates outside the United Kingdom and are issued by Moody’s Investors Service Limited, One Canada Square, Canary, pursuant to the laws applicable to UK credit rating agencies. Approved by Wharf, London E14 5FA. Further information on the Moody’s Office issuing UK approval status and credit rating is available at: https://ratings.moodys.com.
Please see https://ratings.moodys.com for the latest information regarding changes to the lead rating analyst and the Moody’s entity issuing the rating.
Please refer to the issuer/transaction page at https://ratings.moodys.com for additional regulatory disclosures for each credit rating.
Elise Savoye
Vice President – Senior Analyst
Corporate Finance Group
Moody’s France SAS
96 Boulevard Haussmann
Paris, 75008
France
Journalist: 44 20 7772 5456
Client Service: 44 20 7772 5454
Anke Linderman
Associate Managing Director
Corporate Finance Group
Journalist: 44 20 7772 5456
Client Service: 44 20 7772 5454
Release office:
Moody’s France SAS
96 Boulevard Haussmann
Paris, 75008
France
Journalist: 44 20 7772 5456
Client Service: 44 20 7772 5454
