Bloomberg News

Moto Hospitality Rating Lowered as Covenant-Breach Risk Grows

October 24, 2012

Standard & Poor’s cut the rating on Moto Hospitality Ltd. by one level to B- as the U.K.’s largest service station operator gets closer to breaking its loan terms because of sluggish earnings growth.

After raising 450 million pounds ($722 million) of loans last year, breathing space on Moto’s debt tests, linked to earnings before interest, taxes, depreciation and amortization, “significantly tightened” even as it invested funds to update its 59 service stations, S&P said in a report today.

“The downgrade reflects our view that Moto’s liquidity has significantly deteriorated as a result of the group’s inability to grow Ebitda over the past few quarters,” London-based S&P analyst Tim Wells said in the report.

“The company continues to endure reduced consumer spending, flat traffic volumes, and reduced demand for fuel due to higher prices,” according to the report.

A B- rating is six levels lower than investment grade. S&P’s ranking of Moto’s junior-ranking term loan was also lowered one level, to CCC.

The company generated Ebitda of 77 million pounds in 2011 and 864 million pounds in sales according to a regulatory filing on June 7 from Equity Partners Infrastructure Co., one of its shareholders.

“The on-going issues in Europe and Euro zone also continue to affect Moto.” Equity Partners said in the filing. “Given Moto’s leveraged position potential purchasers may consider any sale as ‘distressed’.”

To contact the reporter on this story: Patricia Kuo in London at pkuo2@bloomberg.net

To contact the editor responsible for this story: Faris Khan at fkhan33@bloomberg.net


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