TEXT-S&P comments on credit trends in European leisure industries

The factors behind the credit stability of leisure industries in Europe, the Middle East, and Africa (EMEA) are examined in two reports by Standard & Poor’s Ratings Services titled “Europe’s Leisure Industries Hold Firm Against A Sluggish Economic Environment” and “Credit Quality Of European Leisure Industry Largely Unaffected By Current Economic Uncertainty.”

As the first report points out, almost 80% of the issuers we rate in these industries have stable outlooks. Our view of credit stability for the sector takes into account the lack of material short-term debt maturities and refinancing needs, and generally supportive financial policies, with a number of companies having material headroom at their current rating level.

“Companies’ generally prudent financial policies to date are a key driver underpinning our view of stable credit quality for the EMEA leisure industries in 2012,” said Standard & Poor’s credit analyst Carlo Castelli. “Nevertheless, we anticipate only limited potential for further debt reduction in 2012, on account of declining discretionary cash flow. We base this view on our expectation of increased investments as maintenance capital expenditure (capex) returns to normal levels, and as some companies resume expansion and development capex.

“In addition, we’ve started to see a pickup in mergers and acquisitions. And for companies rated ‘BB’ and above, we see a possibility that shareholder returns may increase, continuing a trend evident in 2011.”