S&P places Euronext’s ‘A-‘ credit rating on CreditWatch with negative implications
S&P Global Ratings today announced it is placing its ‘A-‘ long-term issuer credit rating and ‘A-‘ senior unsecured issue credit rating on Euronext N.V. on CreditWatch with negative implications. At the same time, S&P Global Ratings affirmed its ‘A-2’ short-term issuer credit rating on the company.
As FX News Group has reported, London Stock Exchange Group Plc (LON:LSE) confirmed on October 9, 2020, it has agreed to sell its entire shareholding in London Stock Exchange Group Holdings Italia S.p.A (LSEG Italia), the parent company of Borsa Italiana, to Euronext.
The equity value of the transaction is €4.325 billion, plus an additional amount reflecting cash generation to completion. Euronext intends to fund this with €300 million in cash, €1.8 billion in new debt, and €2.4 billion in equity.
S&P views the transaction a logical extension of Euronext’s strategy as the leading consolidator of EU stock exchanges, and that the geographical and product diversity of its revenue will improve as a result.
However, the CreditWatch placement reflects S&P’s view that the company will substantially increase its financial leverage because of the deal. Whereas S&P expects that the group will remain highly cash-generative and be able to deleverage, it also anticipates that the leverage ratios will remain elevated even through end-2022.
LSEG says that the principal benefit of the Borsa Italiana deal is to facilitate the completion of the Refinitiv transaction. The divestment, which represents an enterprise valuation multiple of 16.7x 2019 adjusted EBITDA, allows LSEG to achieve an attractive valuation for Borsa Italiana. The Board believes that the overall strategic rationale for, and financial benefits of, the Refinitiv transaction remain compelling notwithstanding the divestment of Borsa Italiana.