Research: Rating Action: Moody’s Confirms Amadeus’ Baa2 Long-Term Issuer Rating, Outlook Changes to Stable

Paris, September 14, 2022 — Moody’s Investors Service (“Moody’s”) today affirmed Amadeus IT Group SA’s Baa2 and (P)Baa2 long-term issuer ratings and senior unsecured EMTN program ratings. (Amadeus or the company), respectively. At the same time, Moody’s affirmed Amadeus’ senior unsecured rating Baa2. The company’s P-2 short-term issuer rating and commercial paper rating were also affirmed. The outlook for all ratings changed from negative to stable.

“The ratings affirmations and outlook stabilization reflect Moody’s expectation that Amadeus’ financial performance will continue to recover over the course of 2022 and 2023, such that its financial metrics return to pre-pandemic levels that are compatible with a Baa2 rating,” said Fabrizio Marchesi, VP-Senior Analyst and Principal Analyst for Amadeus. “Moody’s expects the company’s financial performance to continue to recover, despite growing recession risk, particularly as year-over-year comparables will remain relatively easy through the first quarter of 2023,” Marchesi added. .

RATINGS RATIONALE

Today’s change in outlook to stable reflects Moody’s expectation that Amadeus’ financial performance will continue to recover, with revenue increasing to €4.2 billion and €5.0 billion. euros, and a company adjusted EBITDA reaching approximately 1.3 billion euros and 1.9 billion euros, in 2022 and 2023, respectively. As a result, Moody’s adjusted leverage is expected to decline from 4.0x in June 2022 to 2.3x in December 2023.

Moody’s considers that Amadeus could deleverage more quickly than currently expected, if it chooses to allocate part of its significant cash to the balance sheet, which amounted to 1.0 billion euros in June 2022 (or 1.9 billion including short-term investments), and €0.5 billion to €0.6 billion in annual free cash flow (FCF) generation adjusted by Moody’s for early repayment of debt or accretive acquisitions on EBITDA.

Moody’s forecast takes into account the growing likelihood of a recession in the coming quarters, but that this will not materially change the company’s deleveraging over the next 12 to 18 months. Moody’s believes that global travel volumes have been relatively resilient during previous economic downturns, while year-over-year comparables for Amadeus will remain favorable through the first quarter of 2023. Indeed, previous periods have been significantly affected by pandemic-related travel restrictions.

Amadeus’ Baa2 rating also reflects the company’s leading position in the global distribution services (GDS) market; a track record of strong growth and profitability and cash flow, despite the disintermediation risks associated with the GDS model; and the diversification provided by its Air IT Solutions division, which relies on long-term contracts.

The rating also reflects several challenges inherent in the GDS industry, including the risk of disintermediation by airlines; the risk of emergence of alternative distribution models; the inherently cyclical nature of the travel industry; and exposure to exogenous shocks (eg, terrorism and pandemics), as well as potential cybersecurity threats and system disruptions.

LIQUIDITY

As of June 30, 2022, the company’s liquidity was strong at €2.0 billion, consisting of €1.0 billion of balance sheet cash and a non-revolving credit facility (RCF). drawn down from 1.0 billion euros maturing in 2025. The RCF has no pacts. The aforementioned liquidity does not include €0.9 billion of short-term investments, which Moody’s says have maturities of up to six months and could therefore be used as an additional source of liquidity.

Moody’s expects Amadeus to generate approximately €0.5-0.6 billion per year of Moody’s Adjusted FCF over the next 12-18 months, equivalent to approx. 12-13% of Moody’s total adjusted debt, which is calculated before debt repayments but after scheduled dividends. Together with the aforementioned liquidity, Moody’s estimates that this will be sufficient to cover up to €0.5 billion of debt maturities expected in 2023 and up to €1.25 billion of debt maturities expected in 2024. (assuming no capital market activity refinances these maturities).

STRUCTURAL CONSIDERATIONS

Amadeus has a senior unsecured euro medium term note (EMTN) program in place, under which the company is the sole issuer. The provisional (P)Baa2 rating assigned to the senior unsecured EMTN program is aligned with Amadeus’ Baa2 long-term issuer rating. In April 2020, the company issued €750 million of senior unsecured convertible bonds due 2025, which rank pari passu with the aforementioned senior unsecured EMTN program.

RATIONALE FOR A STABLE OUTLOOK

The stable outlook reflects Moody’s expectation that Amadeus will continue to improve its financial performance such that Moody’s adjusted leverage falls towards 2.0x by December 2023 and below 2.0x during 2024, with Moody’s Adjusted FCF generation improving to 10-15% of Moody’s Adjusted Debt over the next 12-18 months.

FACTORS THAT MAY LEAD TO IMPROVEMENT OR DEGRADATION OF RATINGS

Upward pressure on Amadeus’ ratings could develop if Moody’s Debt/Adjusted EBITDA is maintained below 1.5x, with Moody’s FCF/Adjusted Debt above 15%, both on a lasting basis.

Negative pressure on ratings could develop if Moody’s-adjusted debt/EBITDA remains above 2.0x or if FCF/debt declines sustainably towards 10%. Negative pressure on ratings could also arise if there are increasing levels of disintermediation away from the GDS model or if significant alternative distribution channels emerge.

MAIN METHODOLOGY

The main methodology used in these ratings is that of business and consumer services published in November 2021 and available on https://ratings.moodys.com/api/rmc-documents/356424. Otherwise, please see the Scoring Methodologies page on https://ratings.moodys.com for a copy of this methodology.

REGULATORY INFORMATION

For details on key rating assumptions and Moody’s sensitivity analysis, see the Methodological Assumptions and Sensitivity to Assumptions sections in the Disclosure Form. Moody’s rating symbols and definitions can be found at https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security, this announcement provides certain regulatory information regarding each rating of a subsequently issued bond or note of the same series, category/class of debt, security or under a program for which ratings are derived exclusively from existing ratings in accordance with Moody’s rating practices. For ratings issued on a media provider, this announcement provides certain regulatory information relating to the credit rating action on the media provider and each particular credit rating action for securities whose credit ratings are derived from the support provider’s credit rating. For the provisional ratings, this press release provides certain regulatory information relating to the provisional rating assigned, and to a final rating that may be assigned after the final issuance of the debt, in each case where the structure and conditions of the transaction n have not changed prior to the final rating being assigned in a way that would have affected the rating. For more information, please see the issuer/transaction page of the respective issuer at https://ratings.moodys.com.

For all relevant securities or rated entities receiving direct credit support from the lead entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action , the associated regulatory information will be that of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to the jurisdiction: Ancillary services, Disclosures to the rated entity, Disclosures to be provided by the rated entity.

The ratings have been disclosed to the rated entity or its designated agent(s) and issued without modification as a result of such disclosure.

These notes are solicited. Please refer to Moody’s Policy for the Designation and Assignment of Unsolicited Credit Ratings available on its website. https://ratings.moodys.com.

The regulatory information contained in this press release applies to the credit rating and, if applicable, the outlook or rating revision relating thereto.

Moody’s general principles for assessing environmental, social and governance (ESG) risks in our credit analysis are available at https://ratings.moodys.com/documents/PBC_1288235.

The worldwide credit rating on this credit rating announcement has been issued by one of Moody’s affiliates outside the UK and is approved by Moody’s Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the United Kingdom. . Further information on the UK endorsement status and the Moody’s office that issued the credit rating can be found at https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and Moody’s legal entity that issued the rating.

Please see the issuer/transaction page at https://ratings.moodys.com for additional regulatory information for each credit rating.

Fabrice Marchesi
Vice President – Senior Analyst
Corporate Finance Group
Moody’s France SAS
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Paris, 75008
France
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Jeanine Arnold
Associate General Manager
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Customer service: 44 20 7772 5454

Release Office:
Moody’s France SAS
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France
JOURNALISTS: 44 20 7772 5456
Customer service: 44 20 7772 5454

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