12
Guide to Fitch’s Credit Metrics, Financial Terms and Adjustments
Guide to Fitchrsquos Credit Metrics Financial Terms and Adjustments
fitchratingscom
Contents
bull Guide to Credit Metrics 3
bull Financial Terms and Ratios 6
bull Main Analytical Adjustments 10
fitchratingscom 3
Guide to Credit MetricsFitch uses a variety of quantitativemeasures of cash flowearnings leverage and coverage to assess credit risk Thefollowing sections summarise the key credit metrics usedto analyse credit default riskWhile it hasmany limitationsoperating earnings before interest taxes depreciation andamortisation (EBITDA) is still the most commonly usedmeasure globally of segmental cash flow and is thus usedfrequentlyinFitchrsquosresearchcommentaryEBITDAisalsothemostcommonlyusedmeasureforgoing-concernvaluationsAssuchEBITDAplaysakey role inFitchrsquos recoveryanalysis
fordefaultedsecurities (see theCriteriaReport CorporatesNotchingandRecoveryRatingsCriteria)
HowevergiventhelimitationsofEBITDAasapuremeasureof cash flow Fitch utilises a number of othermeasures forthepurposeofassessingdebt-servicingabilityTheseincludefundsflowfromoperations(FFO)cashflowfromoperations(CFO) and free cash flow (FCF) together with leverage andcoverage ratios based on thosemeasures which are morerelevanttodebt-servicingabilityandthereforetodefaultriskthanEBITDA-basedratios
Revenuesndash Operatingexpenditure+ Depreciationandamortisation+ Long-termrentalsa
= Operating EBITDAR+ndash Recurringdividendsreceivedfromassociateslesscashdividendspaidtominorityinterestsbndash Cashinterestpaidnetofinterestreceived
ndash Cashtaxpaidndash Long-termrentalsa
+ndash OtherchangesbeforeFFOc
= Funds flow from operations (FFO)+ndash Workingcapital= Cash flow from operations (CFO)+ndash Non-operationalcashflowndash Capitalexpenditurendash Ordinarydividendspaidtoshareholdersoftheparentcompany= Free cash flow (FCF)+ Receiptsfromassetdisposalsndash Businessacquisitions+ Businessdivestments+ndash Exceptionalandothercash-flowitems= Net cash inoutflow
+ndash Equityissuance(buyback)+ndash Foreignexchangemovement+ndash Otheritemsaffectingcashflowd
= Change in net debtOpeningnetdebt
+ndash ChangeinnetdebtClosing net debt
Definitions of Cash-Flow Measures
aAnalystestimateoflong-termrentalsIncludesIFRS16ASC842leasedepreciationandinterestbAssociateDividendsmaybeexcludedfromEBITDAFFOandCFOifNon-OperationalorNon-RecurringcImpliedbalancingitemtoreconcileOperatingEBITDARwithFundsFlowfromOperationsdImpliedbalancingitemtoreconcileFreeCashFlowwithChangeinNetDebtSourceFitchRatings
fitchratingscom 4
Definitions of Key Concepts
Operating EBITDA and EBITDAR
OperatingEBITDAisawidelyusedmeasureofanissuerrsquosunleverageduntaxedcash-generatingcapacityfromoperatingactivitiesFitchusuallyexcludesextraordinaryitemssuchasassetwrite-downsandrestructuringsincalculatingoperatingEBITDAmdashunlessanissuerhasrecurringone-timechargeswhichindicatetheitemsarenotunusualinnatureFitchwouldalsoexcludemovementsinfairvaluecontainedinoperatingprofit
FitchrsquosoperatingEBITDAiscomputedafterdeductingestimatedrentalexpensebasedonthedepreciationofleasedassetsplusinterestonleaseliabilities
Theuseof operating EBITDAplus estimated rental expense (EBITDAR includingoperating lease payments)improvescomparabilityacrossindustries(egretailandmanufacturing)thatexhibitdifferentaveragelevelsofleasefinancingandwithinindustries(egairlines)wheresomecompaniesuseleasefinancingmorethanothers
Funds flow from operations Post-interestandtaxpre-workingcapital
FFOisthefundamentalmeasureofthefirmrsquoscashflowaftermeetingoperatingexpensesincludingestimatedrentalexpensetaxesandinterestFFOismeasuredaftercashpaymentsfortaxescashreceivedfromassociatesinterestandpreferreddividendspaidandafterdividendspaidtominorityinterestsbutbeforeinflowsoroutflowsrelatedtoworkingcapitalFitchrsquoscomputationsubtractsoraddsbackanamounttoexcludenon-coreornon-operationalcashinfloworoutflowFFOoffersonemeasureofanissuerrsquosoperationalcash-generatingabilitybeforereinvestmentandbeforethevolatilityofworkingcapitalWhenusedininterestcoverageandleverageratiosnetinterestisaddedbacktothenumerator
Working capital Fitchcalculatesthechangeinworkingcapitalthroughtheannualswingsintradereceivablestradeinventorytradepayablesandanyotherrelevantworking-capitalitemItalsoincludesanalyticaladjustmentsthataffectworkingcapitalsuchasfactoringwheresoldreceivablesareaddedbacktotradereceivablestoreversetheeffectsoffactoringonworkingcapital
Cash flow from operations Post-interesttaxandworkingcapital
CFO represents the cash flow available from core operations after all payments for ongoing operationalrequirementsestimatedrentalexpensecashreceivedfromassociatesdividendspaidtominorityinterestsinterestpaidinterestreceivedpreferencedividendsandtaxCFOisalsomeasuredbeforereinvestmentinthebusiness throughcapitalexpenditurebefore receipts fromassetdisposalsbeforeanyacquisitionsorbusinessdivestmentandbeforetheservicingofequitywithdividendsorthebuybackorissuanceofequity
Free cash flow Post-interesttaxworkingcapitalcapitalexpendituresanddividends
FCFisthethirdkeycash-flowmeasureinthechainItmeasuresanissuerrsquoscashfromoperationsaftercapitalexpenditurenon-recurringornon-operationalexpenditure anddividends It alsomeasures thecashflowgeneratedbeforeaccountistakenofbusinessacquisitionsbusinessdivestmentsandanydecisionbytheissuertoissueorbuybackequityormakeaspecialdividend
Liquidity Factorsthatcontributetofinancialflexibilityaretheabilitytoreviseplansforcapitalspendingstrongbankingrelationshipsthedegreeofaccesstoarangeofdebtandequitymarketscommittedlong-datedbanklinesandtheproportionofshort-termdebtinthecapitalstructureTheseissuesareincorporatedintheliquidityconceptThe liquidityscore iscalculatedastheamountofreadilyavailablecashtoserviceormeetdebtand interestobligationsincludingavailabilityundercommittedlinesofcreditandaftertakingintoaccountdebtmaturitieswithinoneyearandalsofactoringexpectedfreecash-flowgenerationoverthecomingyear
Committed bank facilities
Incorporateanalysismdashandparticularfinancialratiosmdashsourcesofliquidityincludeheadroomorundrawnfunds under committed bank facilities relevant for the period Bank facilities which (i) are a contractualcommitmenttolend(ii)havemorethanoneyearuntilmaturityand(iii)FitchbelievesthattherelevantbankwilllendsuchamountstakingintoaccountbreachofcovenantorotherconsiderationscanbeincludedasasourceofliquidityNotallcountrieshavesuchlong-termcommittedbankfundingfacilities
Gross debt and net debt
Gross interest and net interest paid
Debtrepresentstotaldebtorgrossdebtwhilenetdebtistotaldebtminus(freelyavailableunrestricted)cashbasedonFitchrsquosreadilyavailablecashThisldquofreelyavailablecashrdquomaybeadjustedforrestrictedorblockedcashoperationalcashrequirementswithinthegroupandotherformsofcashnotfreelyavailablefordebtreductionRecognising theculturaldifferences in theapproachofanalystsand investorsworldwideFitchevaluatesvariousdebtmeasuresonbothagrossandnetdebtbasisDistinctionsarealsomadebetweentotalinterestandnetinterestpaid
SourceFitchRatings
fitchratingscom 5
Main Leverage and Coverage Ratios
FFO interest coverage
This isacentralmeasureofthefinancialflexibilityofanentity Itcomparestheoperationalcash-generatingabilityofanissuer(aftertax)toitsfinancingcostsManyfactorsinfluencecoverageincludingtherelativelevelsofinterestratesindifferentjurisdictionsthemixoffixed-rateversusfloating-ratefundingandtheuseofzero-couponorpayment-in-kind(PIK)debtForthisreasonthecoverageratiosshouldbeconsideredalongsidetheappropriateleverageratios
FFO fixed-charge coverage
Thismeasureoffinancialflexibility isofparticular relevance forentities thathavematerial levelsof leasefinancing It is important to note that this ratio inherently produces amore conservative result than aninterest cover calculation (ie coverage ratios on debt-funded and lease-funded capital structure are notdirectlycomparable) as theentiretyof the rentalexpenditure (ie theequivalentof interestandprincipalamortisation)isincludedinboththenumeratoranddenominator
FCF debt-service coverage
This is ameasureof theabilityof an issuer tomeetdebt serviceobligations both interest andprincipalfromorganiccashgenerationaftercapitalexpenditurendashandassumingtheservicingofequitycapitalThisindicatestheentityrsquosrelianceuponeitherrefinancinginthedebtorequitymarketsoruponconservationofcashachievedthroughreducingcommondividendsorcapitalexpenditureorbyothermeans
FFO (net) adjusted leverage or total adjusted debtoperating EBITDAR
Thisratioisameasureofthedebtburdenofanentityrelativetoitscash-generatingabilityThismeasureusesa lease-adjusteddebtequivalentandtakesaccountofequitycreditdeductedfromhybriddebtsecuritiesthatmaydisplayequity-likefeaturesandotheroff-balance-sheetdebtLeasesarecapitalisedasamultipleofestimatedrentalexpnsewiththemultipledependingontheindustryandinterest-rateenvironmentaslaidoutinAppendix11exceptforinthetransportationsectorswheretheIFRS16ASC842disclosedleaseliabilityisusedEBITDARbasedratiosarecomputedafterrecurringdividendsreceivedfromassociatesequitymethodinvestmentsanddividendspaidtominorities(oralternativelynetincomeattributabletominorities)
FFO (net) leverage or total debt with equity creditoperating EBITDA
Theseratiosarehaveasimilarfunctionasandaredefinedverysimilarlytotheadjustedratiosalthoughtheyexcludelease-equivalentdebtinthenumeratorandorrentalexpenseinthedenominatorTheseratiosareespeciallyrelevantforissuersthatoperateinasectorthatusestheleases-opexapproach(seeAppendix1forfurtherdetails)LikeEBITDAREBITDAiscomputedafterrecurringdivdiendsarereceivedfromassociatesequitymethod investments anddividendspaid tominorities (or alternatively net incomeattributable tominorities)
Pension-adjusted leverage
Ifoveranumberofyearspension-adjustedratiosaresignificantlyhigherthantheirunadjustedcounterpartsfurther investigation is performed to understand the broader risks posed to the company by its pensionschemeincludingacompanyrsquosfundingobligationsinthejurisdictionsinwhichitoperatestherisksinherentinitsfundingstrategyandmdashimportantlymdashtheimplicationsthesehaveforthecashdrainonthecompanyrsquosresources
SourceFitchRatings
fitchratingscom 6
Financial Terms and RatiosMain Terms
Fitch-defined term Definition
OperatingEBIT GrossProfit-SGampAorOampMExpense-RampDExpense-ProvisionforBadDebts-DepreciationofTangibleassets -Amortisationof IntangibleAssets - -DepreciationofLeasedAssetsndash InterestChargeonLeaseLiabilities - OtherDepreciationandAmortizationexcludedfromSGampAndash Impairments included inEBITDA -Pre-OpeningampExplorationExpense -RegulatoryFees+OtherOperatingIncome(Expenses)-SecuritisationAmortisation
OperatingEBITDA Operating EBIT + adjustment for Non-RecurringNon-Recourse items +non-leasedepreciationampamortisation+analystadjustmentstoEBITDA
OperatingEBITDAR OperatingEBITDA+estimatedOperatingLeaseExpense
CashFlowFromOperations(CFO) NetIncome+TotalAdjustmentstoNetIncome+ChangeinWorkingCapital+RecurringCash Dividends Received from AssociatesEquity Method Investments + Investing ampFinancingCashFlowdeemedasOperating-DividendsPaidtoPreferredShareholders-DistributionstoNon-ControllingInterests
Fitchdefinedworkingcapital ChangeinReceivables+Changeintradepayables+ChangeinAccruedExpenses+anyotherchangesinwcap
FundsFromOperation(FFO) CashFlowFromOperations(CFO)-ChangeinFitch-definedWorkingCapital
FreeCashFlow(FCF) Cash Flow from Operations - Capital Expenditures - Common Dividends + Total Non-OperatingampNon-RecurringCashFlowbeforebusinessacquisitionbusinessdivestmentsandsharebuybackspecialdividends
Totaldebt TotalSecuredDebt+TotalUnsecuredDebt+TotalSubordinatedDebt+PreferredStock+Short-termnon-recourseDebt+Long-ternnon-recourseDebt+SecuritisationDebt+NetDerivative(assets)liabilitiesHedgingPrincipalBorrowings
Totaldebtwithequitycredit TotalDebt-EquityCredit
Totaladjusteddebtwithequitycredit TotalDebtwithEquityCredit+LeaseequivalentDebt+OtheroffBalanceSheetDebt
Readilyavailablecashampequivalents Cash+MarketableSecurities -Cash reportedasRestrictedorBlocked -CashdeemedbyFitchasnot readilyavailable (includingadjustments forminimumcash required forongoingoperationssuchasseasonalityWorkingCapitalfluctuationsandCashHeldbynotWhollyOwnedorNon-RecourseSubsidiariesorinOffshoreHoldings)
Netadjusteddebtwithequitycredit TotalAdjustedDebtwithEquityCredit-ReadilyAvailableCashampEquivalents
Interestpaidreceived CashinterestisusedincoverageratiosbutifInterestPaidorInterestReceivedequalzerothenInterestExpenseandInterestIncomeasperthePampLisusedinstead
SourceFitchRatings
fitchratingscom 7
Main Ratios
Ratio Numerator Denominator
Profitabilitycash flow ratios
EBITmargin OperatingEBIT Revenues
EBITmargin-Group OperatingEBITincludingfinancialservicesoperations
Consolidatedrevenues
EBITmargin-Industrial OperatingEBITexcludingfinancialservicesoperations
Industrialoperationrevenues
OperatingEBITDARmargin OperatingEBITDAR Revenues
FFOmargin FFO Revenues
FCFmargin FreeCashFlow Revenues
CapexCFO CapitalExpenditure CashFlowfromOperations
CFOmargin CashFlowFromOperations Revenues
Leverage ratios
TotaladjusteddebtopEBITDAR(x)
TotalAdjustedDebtwithEquityCredit
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
TotaladjustednetdebtopEBITDAR(x)
NetAdjustedDebtwithEquityCredit OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
FFOadjustedleverage(x) TotalAdjustedDebtwithEquityCredit
FundsFromOperations[FFO]+InterestPaid-InterestReceived+PreferredDividends(Paid)+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOadjustednetleverage(x) NetAdjustedDebtwithEquityCredit FundsFromOperations[FFO]+InterestPaid-InterestReceived+PreferredDividends(Paid)+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOleverage(x) TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt
FundsFromOperations[FFO]+InterestPaidndashInterestReceived+PreferredDividends(Paid)
FFOnetleverage(x) TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebtndashReadilyAvailableCashampEquivalents
FundsFromOperations[FFO]+InterestPaidndashInterestReceived+PreferredDividends(Paid)
(CFOndashCapEx)TotalDebtwithEquityCredit()
CashFlowfromOperations[CFO]ndashCapital(Expenditures)
TotalAdjustedDebtwithEquityCredit-LeaseEquivalentDebt
(CFOndashCapEx)TotalNetDebtwithEquityCredit()
CashFlowfromOperations[CFO]ndashCapital(Expenditures)
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebtndashReadilyAvailableCashampEquivalents
FCFtotaladjusteddebt() FreeCashFlow TotalAdjustedDebtwithEquityCredit
SourceFitchRatings
fitchratingscom 8
Main Ratios (Cont)
Ratio Numerator Denominator
TotaldebtwithequitycreditopEBITDA(x)
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt
OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
TotalnetdebtwithequitycreditoperatingEBITDA
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt-ReadilyAvailableCashampEquivalents
OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
Totaladjdebt(CFObeforeleaseexpense-MaintCapEx)(x)
TotalAdjustedDebtwithEquityCredit CashFlowFromOperations[CFO]+OperatingLeaseExpenseforCapitalisedLeasedAssets-MaintenanceCapex(totalcapexusedifmaintenancecapexunavailable)
Coverage ratios
FFOfixed-chargecoverage(x) FFO+Interestpaid-interestreceived+PreferredDividendspaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
InterestPaid+PreferredDividendsPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOinterestcoverage(x) FFO+Interestpaidminusinterestreceived+PreferredDividendspaid
InterestPaid+PreferredDividendsPaid
OperatingEBITDARgrossinterestpaid+rents(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
OperatingEBITDARnetinterestpaid+rents(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid-InterestReceived+OperatingLeaseExpenseforCapitalisedLeasedAssets
OpEBITDAinterestpaid(x) OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid
SourceFitchRatings
fitchratingscom 9
Main Ratios (Cont)
Ratio Numerator Denominator
OpEBITDAR(interestpaid+leaseexpense)(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
CFOcapitalexpenditures(x) CashFlowfromOperations[CFO] Capital(Expenditures)
CapexCFO() Capital(Expenditures) CashFlowfromOperations[CFO]
Liquidity ratios
FFOdebtservicecover FFO+Interestpaidminusinterestreceived+PreferredDividends+OperatingLeaseExpenseforCapitalisedLeasedAssets
InterestPaid+PreferredDividends+CurrentDebtMaturities
Liquidity(liquidityratio) Availablecash+undrawnportionofcommittedfacilities+FCF
12-monthdebtMaturities
SourceFitchRatings
fitchratingscom 10
Fitch encourages an analytical climate where financialstatements are regarded as a source material providingbroad indications of the financial position rather than as acomprehensive registerof immutable factsThe limitationsofthesourcematerialndashcorporategroupfinancialstatementsndasharemanyandvaried
Forexampleitisnotunusualformajorgroupstobecomposedof hundreds of legal entities Financial statements presenta high-level consolidated picture but material differenceswillexistintheprecisefinancialpositionndashincomeexpenseobligations and cash-generating ability ndash of different legalentitieswithinaconsolidated group whichmay besweptupandmaskedbytheprocessofaccountingconsolidation
Similarly theapparentlysmoothandorderlysequentialflowof thepublishedincomeandcashflowdoes notreflectanactuallinearflowofpaymentsthroughacompanyrsquoshandsoralegalwaterfallofprioritiesbutratheraggregatesatheoreticalflowInpracticethecompanydoesnotwriteachequeforits
entireannualoperatingexpenditurefollowedthenextmonthby one amount for its annual interest bill followed by oneinstalmentforitstaxbillfollowedonlythenbyonepaymentforitsannualcapitalexpenditurebillandsoon
Furthermorefinancialstatementspresentonlyasnapshotofassetsandliabilitiesandaresubjecttooftenverybroadandsubjectivedecisionsonaccountingtreatments
Reflecting the aggregated and approximatenature of thesourcedata Fitchappliesa seriesof commonadjustmentsoutlined below Adjustments that are not material to thecreditanalysisdonothavetobemade
A detailed review of Fitchrsquos financial adjustments can be found in appendix 1 of Fitchrsquos criteria report for non-financial corporates httpswwwfitchratingscomresearchcorporate-financecorporate-rating-criteria-01-05-2020
Main Analytical Adjustments
fitchratingscom 11
Adjustments Description
Leases Creatinganequivalenceindebtmetricsforfinancingundertakenusingleasesinselectedsectors
Hybrids Measuringthedegreetowhichanissuancewithhybridfeaturesmayqualifyfortreatingas50of100equityinourleveragemetrics
Pensions Measuringtheimpactofpensionexposuresonourleverageandcashflowanalysis
DebtFactoring Adjustmentstoreflectthesaleofreceivablesinourdebtmetricsandrecoverygivendefaultanalysis
CashAdjustments Adjustmentstoreflectdifferentqualitiesofcashandotherliquidassets
AdjustingConsolidatedProfilesforGroupStructures
Adjustmentstoreflectthedegreeofownershipandcontrolofcashflowsfromvaryinglevelsofownershiporlegaloperationalseparation
HoldCoPIKandShareholderLoans MeasuringthedegreetowhichshareholderloansandPayment-in-Kindnoteswouldbetreatedaspartoftheratedentityrsquosleverageburden
DebtFair-ValueAdjustments Adjustmentstoensuredebtreviewedisthedebtwhichwillbepayableontheinstrumentrsquosmaturityassuminganentityremainsagoingconcern
AdjustmentsforFinancialServicesActivities
Adjustmentstofinancialservices(lsquoFSrsquo)operationswithincorporatestoreflectFitchrsquosassumptionthatdebtallocatedtotheFSoperationsisrepaidusingthecashflowoftheFSoperationsincludingassumptionsforanyimputedadditionalcapitalfortheFSbusinesswhichFitchmayassumetobeaddedtotheindustrialentityrsquosdebtburden
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ATWWWFITCHRATINGSCOMPUBLISHEDRATINGSCRITERIAANDMETHODOLOGIESAREAVAILABLEFROMTHISSITEATALLTIMESFITCHrsquoSCODEOFCONDUCTCONFIDENTIALITYCONFLICTSOFINTERESTAFFILIATEFIREWALLCOMPLIANCEANDOTHERRELEVANTPOLICIESANDPROCEDURESAREALSOAVAILABLEFROMTHECODEOFCONDUCTSECTIONOFTHISSITEFITCHMAYHAVEPROVIDEDANOTHERPERMISSIBLESERVICETOTHERATEDENTITYORITSRELATEDTHIRDPARTIESDETAILSOFTHISSERVICEFORRATINGSFORWHICHTHELEADANALYSTISBASEDINANEU-REGISTEREDENTITYCANBEFOUNDONTHEENTITYSUMMARYPAGEFORTHISISSUERONTHEFITCHWEBSITECopyrightcopy2020byFitchRatingsIncFitchRatingsLtdanditssubsidiaries33WhitehallStreetNYNY10004Telephone1-800-753-4824(212)908-0500Fax(212)480-4435ReproductionorretransmissioninwholeorinpartisprohibitedexceptbypermissionAllrightsreservedInissuingandmaintainingitsratingsandinmakingotherreports(includingforecastinformation)FitchreliesonfactualinformationitreceivesfromissuersandunderwritersandfromothersourcesFitchbelievestobecredibleFitchconductsareasonable investigationofthefactual informationrelieduponby it inaccordancewith itsratingsmethodologyandobtainsreasonableverificationofthatinformationfromindependentsourcestotheextentsuchsourcesareavailableforagivensecurityorinagivenjurisdictionThemannerofFitchrsquosfactualinvestigationandthescopeofthethird-partyverificationitobtainswillvarydependingonthenatureoftheratedsecurityanditsissuertherequirementsandpracticesinthejurisdictioninwhichtheratedsecurityisofferedandsoldandortheissuerislocatedtheavailabilityandnatureofrelevantpublicinformationaccesstothemanagementoftheissueranditsadviserstheavailabilityofpre-existingthird-partyverificationssuchasauditreportsagreed-uponprocedureslettersappraisalsactuarialreportsengineeringreportslegalopinionsandotherreportsprovidedbythirdpartiestheavailabilityofindependentandcompetentthird-partyverificationsourceswithrespecttotheparticularsecurityorintheparticularjurisdictionoftheissuerandavarietyofotherfactorsUsersofFitchrsquosratingsandreportsshouldunderstandthatneitheranenhancedfactualinvestigationnoranythird-partyverificationcanensurethatalloftheinformationFitchreliesoninconnectionwitharatingorareportwillbeaccurateandcompleteUltimatelytheissueranditsadvisersareresponsiblefortheaccuracyoftheinformationtheyprovidetoFitchandtothemarketinofferingdocumentsandotherreportsInissuingitsratingsanditsreportsFitchmustrelyontheworkofexpertsincludingindependentauditorswithrespecttofinancialstatementsandattorneyswithrespecttolegalandtaxmattersFurtherratingsandforecastsoffinancialandotherinformationareinherentlyforward-lookingandembodyassumptionsandpredictionsaboutfutureeventsthatbytheirnaturecannotbeverifiedasfactsAsaresultdespiteanyverificationofcurrentfactsratingsandforecastscanbeaffectedbyfutureeventsorconditionsthatwerenotanticipatedatthetimearatingorforecastwasissuedoraffirmedTheinformationinthisreportisprovidedldquoasisrdquowithoutanyrepresentationorwarrantyofanykindandFitchdoesnotrepresentorwarrantthatthereportoranyofitscontentswillmeetanyoftherequirementsofarecipientofthereportAFitchratingisanopinionastothecreditworthinessofasecurityThisopinionandreportsmadebyFitcharebasedonestablishedcriteriaandmethodologiesthatFitchiscontinuouslyevaluatingandupdatingThereforeratingsandreportsarethecollectiveworkproductofFitchandnoindividualorgroupofindividualsissolelyresponsibleforaratingorareportTheratingdoesnotaddresstheriskoflossduetorisksotherthancreditriskunlesssuchriskisspecificallymentionedFitchisnotengagedintheofferorsaleofanysecurityAllFitchreportshavesharedauthorshipIndividualsidentifiedinaFitchreportwereinvolvedinbutarenotsolelyresponsiblefortheopinionsstatedthereinTheindividualsarenamedforcontactpurposesonlyAreportprovidingaFitchratingisneitheraprospectusnorasubstitutefortheinformationassembledverifiedandpresentedtoinvestorsbytheissueranditsagentsinconnectionwiththesaleofthesecuritiesRatingsmaybechangedorwithdrawnatanytimeforanyreasoninthesolediscretionofFitchFitchdoesnotprovideinvestmentadviceofanysortRatingsarenotarecommendationtobuysellorholdanysecurityRatingsdonotcommentontheadequacyofmarketpricethesuitabilityofanysecurityforaparticularinvestororthetax-exemptnatureortaxabilityofpaymentsmadeinrespecttoanysecurityFitchreceivesfeesfromissuersinsurersguarantorsotherobligorsandunderwritersforratingsecuritiesSuchfeesgenerallyvaryfromUS$1000toUS$750000(ortheapplicablecurrencyequivalent)perissueIncertaincasesFitchwillratealloranumberofissuesissuedbyaparticularissuerorinsuredorguaranteedbyaparticularinsurerorguarantorforasingleannualfeeSuchfeesareexpectedtovaryfromUS$10000toUS$1500000(ortheapplicablecurrencyequivalent)TheassignmentpublicationordisseminationofaratingbyFitchshallnotconstituteaconsentbyFitchtouseitsnameasanexpertinconnectionwithanyregistrationstatementfiledundertheUnitedStatessecuritieslawstheFinancialServicesandMarketsActof2000oftheUnitedKingdomorthesecuritieslawsofanyparticularjurisdictionDuetotherelativeefficiencyofelectronicpublishinganddistributionFitchresearchmaybeavailabletoelectronicsubscribersuptothreedaysearlierthantoprintsubscribersForAustraliaNewZealandTaiwanandSouthKoreaonlyFitchAustraliaPtyLtdholdsanAustralianfinancialserviceslicense(AFSlicenseno337123)whichauthorizesittoprovidecreditratingstowholesaleclientsonlyCreditratingsinformationpublishedbyFitchisnotintendedtobeusedbypersonswhoareretailclientswithinthemeaningoftheCorporationsAct2001DC-177
Scott CassieSeniorDirectorHead-NorthAmericanCorporatesIssuerBusinessRelationshipManagementFitchRatings300West57StNewYorkNY10019scottcassiefitchratingscom Tom Muoio ManagingDirectorCorporatesandStructuredCreditBusinessRelationshipManagementFitch Ratings 30 North Colonnade Canary Wharf LondonE145GNUKtommuoiofitchratingscom
Kathleen Fuentes HoltzmanManagingDirectorLatinAmericaFitchRatings300West57thStreetNewYorkNYkathleenholtzmanfitchratingscom
Ng Sing Chan ManagingDirectorHeadofAPACBusinessOriginationFitchRatings1RafflesQuaySingapore048583singchanngfitchratingscom
fitchratingscom
Contents
bull Guide to Credit Metrics 3
bull Financial Terms and Ratios 6
bull Main Analytical Adjustments 10
fitchratingscom 3
Guide to Credit MetricsFitch uses a variety of quantitativemeasures of cash flowearnings leverage and coverage to assess credit risk Thefollowing sections summarise the key credit metrics usedto analyse credit default riskWhile it hasmany limitationsoperating earnings before interest taxes depreciation andamortisation (EBITDA) is still the most commonly usedmeasure globally of segmental cash flow and is thus usedfrequentlyinFitchrsquosresearchcommentaryEBITDAisalsothemostcommonlyusedmeasureforgoing-concernvaluationsAssuchEBITDAplaysakey role inFitchrsquos recoveryanalysis
fordefaultedsecurities (see theCriteriaReport CorporatesNotchingandRecoveryRatingsCriteria)
HowevergiventhelimitationsofEBITDAasapuremeasureof cash flow Fitch utilises a number of othermeasures forthepurposeofassessingdebt-servicingabilityTheseincludefundsflowfromoperations(FFO)cashflowfromoperations(CFO) and free cash flow (FCF) together with leverage andcoverage ratios based on thosemeasures which are morerelevanttodebt-servicingabilityandthereforetodefaultriskthanEBITDA-basedratios
Revenuesndash Operatingexpenditure+ Depreciationandamortisation+ Long-termrentalsa
= Operating EBITDAR+ndash Recurringdividendsreceivedfromassociateslesscashdividendspaidtominorityinterestsbndash Cashinterestpaidnetofinterestreceived
ndash Cashtaxpaidndash Long-termrentalsa
+ndash OtherchangesbeforeFFOc
= Funds flow from operations (FFO)+ndash Workingcapital= Cash flow from operations (CFO)+ndash Non-operationalcashflowndash Capitalexpenditurendash Ordinarydividendspaidtoshareholdersoftheparentcompany= Free cash flow (FCF)+ Receiptsfromassetdisposalsndash Businessacquisitions+ Businessdivestments+ndash Exceptionalandothercash-flowitems= Net cash inoutflow
+ndash Equityissuance(buyback)+ndash Foreignexchangemovement+ndash Otheritemsaffectingcashflowd
= Change in net debtOpeningnetdebt
+ndash ChangeinnetdebtClosing net debt
Definitions of Cash-Flow Measures
aAnalystestimateoflong-termrentalsIncludesIFRS16ASC842leasedepreciationandinterestbAssociateDividendsmaybeexcludedfromEBITDAFFOandCFOifNon-OperationalorNon-RecurringcImpliedbalancingitemtoreconcileOperatingEBITDARwithFundsFlowfromOperationsdImpliedbalancingitemtoreconcileFreeCashFlowwithChangeinNetDebtSourceFitchRatings
fitchratingscom 4
Definitions of Key Concepts
Operating EBITDA and EBITDAR
OperatingEBITDAisawidelyusedmeasureofanissuerrsquosunleverageduntaxedcash-generatingcapacityfromoperatingactivitiesFitchusuallyexcludesextraordinaryitemssuchasassetwrite-downsandrestructuringsincalculatingoperatingEBITDAmdashunlessanissuerhasrecurringone-timechargeswhichindicatetheitemsarenotunusualinnatureFitchwouldalsoexcludemovementsinfairvaluecontainedinoperatingprofit
FitchrsquosoperatingEBITDAiscomputedafterdeductingestimatedrentalexpensebasedonthedepreciationofleasedassetsplusinterestonleaseliabilities
Theuseof operating EBITDAplus estimated rental expense (EBITDAR includingoperating lease payments)improvescomparabilityacrossindustries(egretailandmanufacturing)thatexhibitdifferentaveragelevelsofleasefinancingandwithinindustries(egairlines)wheresomecompaniesuseleasefinancingmorethanothers
Funds flow from operations Post-interestandtaxpre-workingcapital
FFOisthefundamentalmeasureofthefirmrsquoscashflowaftermeetingoperatingexpensesincludingestimatedrentalexpensetaxesandinterestFFOismeasuredaftercashpaymentsfortaxescashreceivedfromassociatesinterestandpreferreddividendspaidandafterdividendspaidtominorityinterestsbutbeforeinflowsoroutflowsrelatedtoworkingcapitalFitchrsquoscomputationsubtractsoraddsbackanamounttoexcludenon-coreornon-operationalcashinfloworoutflowFFOoffersonemeasureofanissuerrsquosoperationalcash-generatingabilitybeforereinvestmentandbeforethevolatilityofworkingcapitalWhenusedininterestcoverageandleverageratiosnetinterestisaddedbacktothenumerator
Working capital Fitchcalculatesthechangeinworkingcapitalthroughtheannualswingsintradereceivablestradeinventorytradepayablesandanyotherrelevantworking-capitalitemItalsoincludesanalyticaladjustmentsthataffectworkingcapitalsuchasfactoringwheresoldreceivablesareaddedbacktotradereceivablestoreversetheeffectsoffactoringonworkingcapital
Cash flow from operations Post-interesttaxandworkingcapital
CFO represents the cash flow available from core operations after all payments for ongoing operationalrequirementsestimatedrentalexpensecashreceivedfromassociatesdividendspaidtominorityinterestsinterestpaidinterestreceivedpreferencedividendsandtaxCFOisalsomeasuredbeforereinvestmentinthebusiness throughcapitalexpenditurebefore receipts fromassetdisposalsbeforeanyacquisitionsorbusinessdivestmentandbeforetheservicingofequitywithdividendsorthebuybackorissuanceofequity
Free cash flow Post-interesttaxworkingcapitalcapitalexpendituresanddividends
FCFisthethirdkeycash-flowmeasureinthechainItmeasuresanissuerrsquoscashfromoperationsaftercapitalexpenditurenon-recurringornon-operationalexpenditure anddividends It alsomeasures thecashflowgeneratedbeforeaccountistakenofbusinessacquisitionsbusinessdivestmentsandanydecisionbytheissuertoissueorbuybackequityormakeaspecialdividend
Liquidity Factorsthatcontributetofinancialflexibilityaretheabilitytoreviseplansforcapitalspendingstrongbankingrelationshipsthedegreeofaccesstoarangeofdebtandequitymarketscommittedlong-datedbanklinesandtheproportionofshort-termdebtinthecapitalstructureTheseissuesareincorporatedintheliquidityconceptThe liquidityscore iscalculatedastheamountofreadilyavailablecashtoserviceormeetdebtand interestobligationsincludingavailabilityundercommittedlinesofcreditandaftertakingintoaccountdebtmaturitieswithinoneyearandalsofactoringexpectedfreecash-flowgenerationoverthecomingyear
Committed bank facilities
Incorporateanalysismdashandparticularfinancialratiosmdashsourcesofliquidityincludeheadroomorundrawnfunds under committed bank facilities relevant for the period Bank facilities which (i) are a contractualcommitmenttolend(ii)havemorethanoneyearuntilmaturityand(iii)FitchbelievesthattherelevantbankwilllendsuchamountstakingintoaccountbreachofcovenantorotherconsiderationscanbeincludedasasourceofliquidityNotallcountrieshavesuchlong-termcommittedbankfundingfacilities
Gross debt and net debt
Gross interest and net interest paid
Debtrepresentstotaldebtorgrossdebtwhilenetdebtistotaldebtminus(freelyavailableunrestricted)cashbasedonFitchrsquosreadilyavailablecashThisldquofreelyavailablecashrdquomaybeadjustedforrestrictedorblockedcashoperationalcashrequirementswithinthegroupandotherformsofcashnotfreelyavailablefordebtreductionRecognising theculturaldifferences in theapproachofanalystsand investorsworldwideFitchevaluatesvariousdebtmeasuresonbothagrossandnetdebtbasisDistinctionsarealsomadebetweentotalinterestandnetinterestpaid
SourceFitchRatings
fitchratingscom 5
Main Leverage and Coverage Ratios
FFO interest coverage
This isacentralmeasureofthefinancialflexibilityofanentity Itcomparestheoperationalcash-generatingabilityofanissuer(aftertax)toitsfinancingcostsManyfactorsinfluencecoverageincludingtherelativelevelsofinterestratesindifferentjurisdictionsthemixoffixed-rateversusfloating-ratefundingandtheuseofzero-couponorpayment-in-kind(PIK)debtForthisreasonthecoverageratiosshouldbeconsideredalongsidetheappropriateleverageratios
FFO fixed-charge coverage
Thismeasureoffinancialflexibility isofparticular relevance forentities thathavematerial levelsof leasefinancing It is important to note that this ratio inherently produces amore conservative result than aninterest cover calculation (ie coverage ratios on debt-funded and lease-funded capital structure are notdirectlycomparable) as theentiretyof the rentalexpenditure (ie theequivalentof interestandprincipalamortisation)isincludedinboththenumeratoranddenominator
FCF debt-service coverage
This is ameasureof theabilityof an issuer tomeetdebt serviceobligations both interest andprincipalfromorganiccashgenerationaftercapitalexpenditurendashandassumingtheservicingofequitycapitalThisindicatestheentityrsquosrelianceuponeitherrefinancinginthedebtorequitymarketsoruponconservationofcashachievedthroughreducingcommondividendsorcapitalexpenditureorbyothermeans
FFO (net) adjusted leverage or total adjusted debtoperating EBITDAR
Thisratioisameasureofthedebtburdenofanentityrelativetoitscash-generatingabilityThismeasureusesa lease-adjusteddebtequivalentandtakesaccountofequitycreditdeductedfromhybriddebtsecuritiesthatmaydisplayequity-likefeaturesandotheroff-balance-sheetdebtLeasesarecapitalisedasamultipleofestimatedrentalexpnsewiththemultipledependingontheindustryandinterest-rateenvironmentaslaidoutinAppendix11exceptforinthetransportationsectorswheretheIFRS16ASC842disclosedleaseliabilityisusedEBITDARbasedratiosarecomputedafterrecurringdividendsreceivedfromassociatesequitymethodinvestmentsanddividendspaidtominorities(oralternativelynetincomeattributabletominorities)
FFO (net) leverage or total debt with equity creditoperating EBITDA
Theseratiosarehaveasimilarfunctionasandaredefinedverysimilarlytotheadjustedratiosalthoughtheyexcludelease-equivalentdebtinthenumeratorandorrentalexpenseinthedenominatorTheseratiosareespeciallyrelevantforissuersthatoperateinasectorthatusestheleases-opexapproach(seeAppendix1forfurtherdetails)LikeEBITDAREBITDAiscomputedafterrecurringdivdiendsarereceivedfromassociatesequitymethod investments anddividendspaid tominorities (or alternatively net incomeattributable tominorities)
Pension-adjusted leverage
Ifoveranumberofyearspension-adjustedratiosaresignificantlyhigherthantheirunadjustedcounterpartsfurther investigation is performed to understand the broader risks posed to the company by its pensionschemeincludingacompanyrsquosfundingobligationsinthejurisdictionsinwhichitoperatestherisksinherentinitsfundingstrategyandmdashimportantlymdashtheimplicationsthesehaveforthecashdrainonthecompanyrsquosresources
SourceFitchRatings
fitchratingscom 6
Financial Terms and RatiosMain Terms
Fitch-defined term Definition
OperatingEBIT GrossProfit-SGampAorOampMExpense-RampDExpense-ProvisionforBadDebts-DepreciationofTangibleassets -Amortisationof IntangibleAssets - -DepreciationofLeasedAssetsndash InterestChargeonLeaseLiabilities - OtherDepreciationandAmortizationexcludedfromSGampAndash Impairments included inEBITDA -Pre-OpeningampExplorationExpense -RegulatoryFees+OtherOperatingIncome(Expenses)-SecuritisationAmortisation
OperatingEBITDA Operating EBIT + adjustment for Non-RecurringNon-Recourse items +non-leasedepreciationampamortisation+analystadjustmentstoEBITDA
OperatingEBITDAR OperatingEBITDA+estimatedOperatingLeaseExpense
CashFlowFromOperations(CFO) NetIncome+TotalAdjustmentstoNetIncome+ChangeinWorkingCapital+RecurringCash Dividends Received from AssociatesEquity Method Investments + Investing ampFinancingCashFlowdeemedasOperating-DividendsPaidtoPreferredShareholders-DistributionstoNon-ControllingInterests
Fitchdefinedworkingcapital ChangeinReceivables+Changeintradepayables+ChangeinAccruedExpenses+anyotherchangesinwcap
FundsFromOperation(FFO) CashFlowFromOperations(CFO)-ChangeinFitch-definedWorkingCapital
FreeCashFlow(FCF) Cash Flow from Operations - Capital Expenditures - Common Dividends + Total Non-OperatingampNon-RecurringCashFlowbeforebusinessacquisitionbusinessdivestmentsandsharebuybackspecialdividends
Totaldebt TotalSecuredDebt+TotalUnsecuredDebt+TotalSubordinatedDebt+PreferredStock+Short-termnon-recourseDebt+Long-ternnon-recourseDebt+SecuritisationDebt+NetDerivative(assets)liabilitiesHedgingPrincipalBorrowings
Totaldebtwithequitycredit TotalDebt-EquityCredit
Totaladjusteddebtwithequitycredit TotalDebtwithEquityCredit+LeaseequivalentDebt+OtheroffBalanceSheetDebt
Readilyavailablecashampequivalents Cash+MarketableSecurities -Cash reportedasRestrictedorBlocked -CashdeemedbyFitchasnot readilyavailable (includingadjustments forminimumcash required forongoingoperationssuchasseasonalityWorkingCapitalfluctuationsandCashHeldbynotWhollyOwnedorNon-RecourseSubsidiariesorinOffshoreHoldings)
Netadjusteddebtwithequitycredit TotalAdjustedDebtwithEquityCredit-ReadilyAvailableCashampEquivalents
Interestpaidreceived CashinterestisusedincoverageratiosbutifInterestPaidorInterestReceivedequalzerothenInterestExpenseandInterestIncomeasperthePampLisusedinstead
SourceFitchRatings
fitchratingscom 7
Main Ratios
Ratio Numerator Denominator
Profitabilitycash flow ratios
EBITmargin OperatingEBIT Revenues
EBITmargin-Group OperatingEBITincludingfinancialservicesoperations
Consolidatedrevenues
EBITmargin-Industrial OperatingEBITexcludingfinancialservicesoperations
Industrialoperationrevenues
OperatingEBITDARmargin OperatingEBITDAR Revenues
FFOmargin FFO Revenues
FCFmargin FreeCashFlow Revenues
CapexCFO CapitalExpenditure CashFlowfromOperations
CFOmargin CashFlowFromOperations Revenues
Leverage ratios
TotaladjusteddebtopEBITDAR(x)
TotalAdjustedDebtwithEquityCredit
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
TotaladjustednetdebtopEBITDAR(x)
NetAdjustedDebtwithEquityCredit OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
FFOadjustedleverage(x) TotalAdjustedDebtwithEquityCredit
FundsFromOperations[FFO]+InterestPaid-InterestReceived+PreferredDividends(Paid)+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOadjustednetleverage(x) NetAdjustedDebtwithEquityCredit FundsFromOperations[FFO]+InterestPaid-InterestReceived+PreferredDividends(Paid)+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOleverage(x) TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt
FundsFromOperations[FFO]+InterestPaidndashInterestReceived+PreferredDividends(Paid)
FFOnetleverage(x) TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebtndashReadilyAvailableCashampEquivalents
FundsFromOperations[FFO]+InterestPaidndashInterestReceived+PreferredDividends(Paid)
(CFOndashCapEx)TotalDebtwithEquityCredit()
CashFlowfromOperations[CFO]ndashCapital(Expenditures)
TotalAdjustedDebtwithEquityCredit-LeaseEquivalentDebt
(CFOndashCapEx)TotalNetDebtwithEquityCredit()
CashFlowfromOperations[CFO]ndashCapital(Expenditures)
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebtndashReadilyAvailableCashampEquivalents
FCFtotaladjusteddebt() FreeCashFlow TotalAdjustedDebtwithEquityCredit
SourceFitchRatings
fitchratingscom 8
Main Ratios (Cont)
Ratio Numerator Denominator
TotaldebtwithequitycreditopEBITDA(x)
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt
OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
TotalnetdebtwithequitycreditoperatingEBITDA
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt-ReadilyAvailableCashampEquivalents
OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
Totaladjdebt(CFObeforeleaseexpense-MaintCapEx)(x)
TotalAdjustedDebtwithEquityCredit CashFlowFromOperations[CFO]+OperatingLeaseExpenseforCapitalisedLeasedAssets-MaintenanceCapex(totalcapexusedifmaintenancecapexunavailable)
Coverage ratios
FFOfixed-chargecoverage(x) FFO+Interestpaid-interestreceived+PreferredDividendspaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
InterestPaid+PreferredDividendsPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOinterestcoverage(x) FFO+Interestpaidminusinterestreceived+PreferredDividendspaid
InterestPaid+PreferredDividendsPaid
OperatingEBITDARgrossinterestpaid+rents(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
OperatingEBITDARnetinterestpaid+rents(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid-InterestReceived+OperatingLeaseExpenseforCapitalisedLeasedAssets
OpEBITDAinterestpaid(x) OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid
SourceFitchRatings
fitchratingscom 9
Main Ratios (Cont)
Ratio Numerator Denominator
OpEBITDAR(interestpaid+leaseexpense)(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
CFOcapitalexpenditures(x) CashFlowfromOperations[CFO] Capital(Expenditures)
CapexCFO() Capital(Expenditures) CashFlowfromOperations[CFO]
Liquidity ratios
FFOdebtservicecover FFO+Interestpaidminusinterestreceived+PreferredDividends+OperatingLeaseExpenseforCapitalisedLeasedAssets
InterestPaid+PreferredDividends+CurrentDebtMaturities
Liquidity(liquidityratio) Availablecash+undrawnportionofcommittedfacilities+FCF
12-monthdebtMaturities
SourceFitchRatings
fitchratingscom 10
Fitch encourages an analytical climate where financialstatements are regarded as a source material providingbroad indications of the financial position rather than as acomprehensive registerof immutable factsThe limitationsofthesourcematerialndashcorporategroupfinancialstatementsndasharemanyandvaried
Forexampleitisnotunusualformajorgroupstobecomposedof hundreds of legal entities Financial statements presenta high-level consolidated picture but material differenceswillexistintheprecisefinancialpositionndashincomeexpenseobligations and cash-generating ability ndash of different legalentitieswithinaconsolidated group whichmay besweptupandmaskedbytheprocessofaccountingconsolidation
Similarly theapparentlysmoothandorderlysequentialflowof thepublishedincomeandcashflowdoes notreflectanactuallinearflowofpaymentsthroughacompanyrsquoshandsoralegalwaterfallofprioritiesbutratheraggregatesatheoreticalflowInpracticethecompanydoesnotwriteachequeforits
entireannualoperatingexpenditurefollowedthenextmonthby one amount for its annual interest bill followed by oneinstalmentforitstaxbillfollowedonlythenbyonepaymentforitsannualcapitalexpenditurebillandsoon
Furthermorefinancialstatementspresentonlyasnapshotofassetsandliabilitiesandaresubjecttooftenverybroadandsubjectivedecisionsonaccountingtreatments
Reflecting the aggregated and approximatenature of thesourcedata Fitchappliesa seriesof commonadjustmentsoutlined below Adjustments that are not material to thecreditanalysisdonothavetobemade
A detailed review of Fitchrsquos financial adjustments can be found in appendix 1 of Fitchrsquos criteria report for non-financial corporates httpswwwfitchratingscomresearchcorporate-financecorporate-rating-criteria-01-05-2020
Main Analytical Adjustments
fitchratingscom 11
Adjustments Description
Leases Creatinganequivalenceindebtmetricsforfinancingundertakenusingleasesinselectedsectors
Hybrids Measuringthedegreetowhichanissuancewithhybridfeaturesmayqualifyfortreatingas50of100equityinourleveragemetrics
Pensions Measuringtheimpactofpensionexposuresonourleverageandcashflowanalysis
DebtFactoring Adjustmentstoreflectthesaleofreceivablesinourdebtmetricsandrecoverygivendefaultanalysis
CashAdjustments Adjustmentstoreflectdifferentqualitiesofcashandotherliquidassets
AdjustingConsolidatedProfilesforGroupStructures
Adjustmentstoreflectthedegreeofownershipandcontrolofcashflowsfromvaryinglevelsofownershiporlegaloperationalseparation
HoldCoPIKandShareholderLoans MeasuringthedegreetowhichshareholderloansandPayment-in-Kindnoteswouldbetreatedaspartoftheratedentityrsquosleverageburden
DebtFair-ValueAdjustments Adjustmentstoensuredebtreviewedisthedebtwhichwillbepayableontheinstrumentrsquosmaturityassuminganentityremainsagoingconcern
AdjustmentsforFinancialServicesActivities
Adjustmentstofinancialservices(lsquoFSrsquo)operationswithincorporatestoreflectFitchrsquosassumptionthatdebtallocatedtotheFSoperationsisrepaidusingthecashflowoftheFSoperationsincludingassumptionsforanyimputedadditionalcapitalfortheFSbusinesswhichFitchmayassumetobeaddedtotheindustrialentityrsquosdebtburden
Contact Us
ALL FITCHCREDITRATINGSARESUBJECTTOCERTAINLIMITATIONSANDDISCLAIMERS PLEASEREADTHESELIMITATIONSANDDISCLAIMERSBY FOLLOWINGTHIS LINKHTTPSWWWFITCHRATINGSCOMSITEDEFINITIONS IN ADDITION RATING DEFINITIONS AND THE TERMSOF USEOF SUCH RATINGS ARE AVAILABLEON THE AGENCYrsquoS PUBLICWEB SITE ATWWWFITCHRATINGSCOMPUBLISHEDRATINGSCRITERIAANDMETHODOLOGIESAREAVAILABLEFROMTHISSITEATALLTIMESFITCHrsquoSCODEOFCONDUCTCONFIDENTIALITYCONFLICTSOFINTERESTAFFILIATEFIREWALLCOMPLIANCEANDOTHERRELEVANTPOLICIESANDPROCEDURESAREALSOAVAILABLEFROMTHECODEOFCONDUCTSECTIONOFTHISSITEFITCHMAYHAVEPROVIDEDANOTHERPERMISSIBLESERVICETOTHERATEDENTITYORITSRELATEDTHIRDPARTIESDETAILSOFTHISSERVICEFORRATINGSFORWHICHTHELEADANALYSTISBASEDINANEU-REGISTEREDENTITYCANBEFOUNDONTHEENTITYSUMMARYPAGEFORTHISISSUERONTHEFITCHWEBSITECopyrightcopy2020byFitchRatingsIncFitchRatingsLtdanditssubsidiaries33WhitehallStreetNYNY10004Telephone1-800-753-4824(212)908-0500Fax(212)480-4435ReproductionorretransmissioninwholeorinpartisprohibitedexceptbypermissionAllrightsreservedInissuingandmaintainingitsratingsandinmakingotherreports(includingforecastinformation)FitchreliesonfactualinformationitreceivesfromissuersandunderwritersandfromothersourcesFitchbelievestobecredibleFitchconductsareasonable investigationofthefactual informationrelieduponby it inaccordancewith itsratingsmethodologyandobtainsreasonableverificationofthatinformationfromindependentsourcestotheextentsuchsourcesareavailableforagivensecurityorinagivenjurisdictionThemannerofFitchrsquosfactualinvestigationandthescopeofthethird-partyverificationitobtainswillvarydependingonthenatureoftheratedsecurityanditsissuertherequirementsandpracticesinthejurisdictioninwhichtheratedsecurityisofferedandsoldandortheissuerislocatedtheavailabilityandnatureofrelevantpublicinformationaccesstothemanagementoftheissueranditsadviserstheavailabilityofpre-existingthird-partyverificationssuchasauditreportsagreed-uponprocedureslettersappraisalsactuarialreportsengineeringreportslegalopinionsandotherreportsprovidedbythirdpartiestheavailabilityofindependentandcompetentthird-partyverificationsourceswithrespecttotheparticularsecurityorintheparticularjurisdictionoftheissuerandavarietyofotherfactorsUsersofFitchrsquosratingsandreportsshouldunderstandthatneitheranenhancedfactualinvestigationnoranythird-partyverificationcanensurethatalloftheinformationFitchreliesoninconnectionwitharatingorareportwillbeaccurateandcompleteUltimatelytheissueranditsadvisersareresponsiblefortheaccuracyoftheinformationtheyprovidetoFitchandtothemarketinofferingdocumentsandotherreportsInissuingitsratingsanditsreportsFitchmustrelyontheworkofexpertsincludingindependentauditorswithrespecttofinancialstatementsandattorneyswithrespecttolegalandtaxmattersFurtherratingsandforecastsoffinancialandotherinformationareinherentlyforward-lookingandembodyassumptionsandpredictionsaboutfutureeventsthatbytheirnaturecannotbeverifiedasfactsAsaresultdespiteanyverificationofcurrentfactsratingsandforecastscanbeaffectedbyfutureeventsorconditionsthatwerenotanticipatedatthetimearatingorforecastwasissuedoraffirmedTheinformationinthisreportisprovidedldquoasisrdquowithoutanyrepresentationorwarrantyofanykindandFitchdoesnotrepresentorwarrantthatthereportoranyofitscontentswillmeetanyoftherequirementsofarecipientofthereportAFitchratingisanopinionastothecreditworthinessofasecurityThisopinionandreportsmadebyFitcharebasedonestablishedcriteriaandmethodologiesthatFitchiscontinuouslyevaluatingandupdatingThereforeratingsandreportsarethecollectiveworkproductofFitchandnoindividualorgroupofindividualsissolelyresponsibleforaratingorareportTheratingdoesnotaddresstheriskoflossduetorisksotherthancreditriskunlesssuchriskisspecificallymentionedFitchisnotengagedintheofferorsaleofanysecurityAllFitchreportshavesharedauthorshipIndividualsidentifiedinaFitchreportwereinvolvedinbutarenotsolelyresponsiblefortheopinionsstatedthereinTheindividualsarenamedforcontactpurposesonlyAreportprovidingaFitchratingisneitheraprospectusnorasubstitutefortheinformationassembledverifiedandpresentedtoinvestorsbytheissueranditsagentsinconnectionwiththesaleofthesecuritiesRatingsmaybechangedorwithdrawnatanytimeforanyreasoninthesolediscretionofFitchFitchdoesnotprovideinvestmentadviceofanysortRatingsarenotarecommendationtobuysellorholdanysecurityRatingsdonotcommentontheadequacyofmarketpricethesuitabilityofanysecurityforaparticularinvestororthetax-exemptnatureortaxabilityofpaymentsmadeinrespecttoanysecurityFitchreceivesfeesfromissuersinsurersguarantorsotherobligorsandunderwritersforratingsecuritiesSuchfeesgenerallyvaryfromUS$1000toUS$750000(ortheapplicablecurrencyequivalent)perissueIncertaincasesFitchwillratealloranumberofissuesissuedbyaparticularissuerorinsuredorguaranteedbyaparticularinsurerorguarantorforasingleannualfeeSuchfeesareexpectedtovaryfromUS$10000toUS$1500000(ortheapplicablecurrencyequivalent)TheassignmentpublicationordisseminationofaratingbyFitchshallnotconstituteaconsentbyFitchtouseitsnameasanexpertinconnectionwithanyregistrationstatementfiledundertheUnitedStatessecuritieslawstheFinancialServicesandMarketsActof2000oftheUnitedKingdomorthesecuritieslawsofanyparticularjurisdictionDuetotherelativeefficiencyofelectronicpublishinganddistributionFitchresearchmaybeavailabletoelectronicsubscribersuptothreedaysearlierthantoprintsubscribersForAustraliaNewZealandTaiwanandSouthKoreaonlyFitchAustraliaPtyLtdholdsanAustralianfinancialserviceslicense(AFSlicenseno337123)whichauthorizesittoprovidecreditratingstowholesaleclientsonlyCreditratingsinformationpublishedbyFitchisnotintendedtobeusedbypersonswhoareretailclientswithinthemeaningoftheCorporationsAct2001DC-177
Scott CassieSeniorDirectorHead-NorthAmericanCorporatesIssuerBusinessRelationshipManagementFitchRatings300West57StNewYorkNY10019scottcassiefitchratingscom Tom Muoio ManagingDirectorCorporatesandStructuredCreditBusinessRelationshipManagementFitch Ratings 30 North Colonnade Canary Wharf LondonE145GNUKtommuoiofitchratingscom
Kathleen Fuentes HoltzmanManagingDirectorLatinAmericaFitchRatings300West57thStreetNewYorkNYkathleenholtzmanfitchratingscom
Ng Sing Chan ManagingDirectorHeadofAPACBusinessOriginationFitchRatings1RafflesQuaySingapore048583singchanngfitchratingscom
fitchratingscom 3
Guide to Credit MetricsFitch uses a variety of quantitativemeasures of cash flowearnings leverage and coverage to assess credit risk Thefollowing sections summarise the key credit metrics usedto analyse credit default riskWhile it hasmany limitationsoperating earnings before interest taxes depreciation andamortisation (EBITDA) is still the most commonly usedmeasure globally of segmental cash flow and is thus usedfrequentlyinFitchrsquosresearchcommentaryEBITDAisalsothemostcommonlyusedmeasureforgoing-concernvaluationsAssuchEBITDAplaysakey role inFitchrsquos recoveryanalysis
fordefaultedsecurities (see theCriteriaReport CorporatesNotchingandRecoveryRatingsCriteria)
HowevergiventhelimitationsofEBITDAasapuremeasureof cash flow Fitch utilises a number of othermeasures forthepurposeofassessingdebt-servicingabilityTheseincludefundsflowfromoperations(FFO)cashflowfromoperations(CFO) and free cash flow (FCF) together with leverage andcoverage ratios based on thosemeasures which are morerelevanttodebt-servicingabilityandthereforetodefaultriskthanEBITDA-basedratios
Revenuesndash Operatingexpenditure+ Depreciationandamortisation+ Long-termrentalsa
= Operating EBITDAR+ndash Recurringdividendsreceivedfromassociateslesscashdividendspaidtominorityinterestsbndash Cashinterestpaidnetofinterestreceived
ndash Cashtaxpaidndash Long-termrentalsa
+ndash OtherchangesbeforeFFOc
= Funds flow from operations (FFO)+ndash Workingcapital= Cash flow from operations (CFO)+ndash Non-operationalcashflowndash Capitalexpenditurendash Ordinarydividendspaidtoshareholdersoftheparentcompany= Free cash flow (FCF)+ Receiptsfromassetdisposalsndash Businessacquisitions+ Businessdivestments+ndash Exceptionalandothercash-flowitems= Net cash inoutflow
+ndash Equityissuance(buyback)+ndash Foreignexchangemovement+ndash Otheritemsaffectingcashflowd
= Change in net debtOpeningnetdebt
+ndash ChangeinnetdebtClosing net debt
Definitions of Cash-Flow Measures
aAnalystestimateoflong-termrentalsIncludesIFRS16ASC842leasedepreciationandinterestbAssociateDividendsmaybeexcludedfromEBITDAFFOandCFOifNon-OperationalorNon-RecurringcImpliedbalancingitemtoreconcileOperatingEBITDARwithFundsFlowfromOperationsdImpliedbalancingitemtoreconcileFreeCashFlowwithChangeinNetDebtSourceFitchRatings
fitchratingscom 4
Definitions of Key Concepts
Operating EBITDA and EBITDAR
OperatingEBITDAisawidelyusedmeasureofanissuerrsquosunleverageduntaxedcash-generatingcapacityfromoperatingactivitiesFitchusuallyexcludesextraordinaryitemssuchasassetwrite-downsandrestructuringsincalculatingoperatingEBITDAmdashunlessanissuerhasrecurringone-timechargeswhichindicatetheitemsarenotunusualinnatureFitchwouldalsoexcludemovementsinfairvaluecontainedinoperatingprofit
FitchrsquosoperatingEBITDAiscomputedafterdeductingestimatedrentalexpensebasedonthedepreciationofleasedassetsplusinterestonleaseliabilities
Theuseof operating EBITDAplus estimated rental expense (EBITDAR includingoperating lease payments)improvescomparabilityacrossindustries(egretailandmanufacturing)thatexhibitdifferentaveragelevelsofleasefinancingandwithinindustries(egairlines)wheresomecompaniesuseleasefinancingmorethanothers
Funds flow from operations Post-interestandtaxpre-workingcapital
FFOisthefundamentalmeasureofthefirmrsquoscashflowaftermeetingoperatingexpensesincludingestimatedrentalexpensetaxesandinterestFFOismeasuredaftercashpaymentsfortaxescashreceivedfromassociatesinterestandpreferreddividendspaidandafterdividendspaidtominorityinterestsbutbeforeinflowsoroutflowsrelatedtoworkingcapitalFitchrsquoscomputationsubtractsoraddsbackanamounttoexcludenon-coreornon-operationalcashinfloworoutflowFFOoffersonemeasureofanissuerrsquosoperationalcash-generatingabilitybeforereinvestmentandbeforethevolatilityofworkingcapitalWhenusedininterestcoverageandleverageratiosnetinterestisaddedbacktothenumerator
Working capital Fitchcalculatesthechangeinworkingcapitalthroughtheannualswingsintradereceivablestradeinventorytradepayablesandanyotherrelevantworking-capitalitemItalsoincludesanalyticaladjustmentsthataffectworkingcapitalsuchasfactoringwheresoldreceivablesareaddedbacktotradereceivablestoreversetheeffectsoffactoringonworkingcapital
Cash flow from operations Post-interesttaxandworkingcapital
CFO represents the cash flow available from core operations after all payments for ongoing operationalrequirementsestimatedrentalexpensecashreceivedfromassociatesdividendspaidtominorityinterestsinterestpaidinterestreceivedpreferencedividendsandtaxCFOisalsomeasuredbeforereinvestmentinthebusiness throughcapitalexpenditurebefore receipts fromassetdisposalsbeforeanyacquisitionsorbusinessdivestmentandbeforetheservicingofequitywithdividendsorthebuybackorissuanceofequity
Free cash flow Post-interesttaxworkingcapitalcapitalexpendituresanddividends
FCFisthethirdkeycash-flowmeasureinthechainItmeasuresanissuerrsquoscashfromoperationsaftercapitalexpenditurenon-recurringornon-operationalexpenditure anddividends It alsomeasures thecashflowgeneratedbeforeaccountistakenofbusinessacquisitionsbusinessdivestmentsandanydecisionbytheissuertoissueorbuybackequityormakeaspecialdividend
Liquidity Factorsthatcontributetofinancialflexibilityaretheabilitytoreviseplansforcapitalspendingstrongbankingrelationshipsthedegreeofaccesstoarangeofdebtandequitymarketscommittedlong-datedbanklinesandtheproportionofshort-termdebtinthecapitalstructureTheseissuesareincorporatedintheliquidityconceptThe liquidityscore iscalculatedastheamountofreadilyavailablecashtoserviceormeetdebtand interestobligationsincludingavailabilityundercommittedlinesofcreditandaftertakingintoaccountdebtmaturitieswithinoneyearandalsofactoringexpectedfreecash-flowgenerationoverthecomingyear
Committed bank facilities
Incorporateanalysismdashandparticularfinancialratiosmdashsourcesofliquidityincludeheadroomorundrawnfunds under committed bank facilities relevant for the period Bank facilities which (i) are a contractualcommitmenttolend(ii)havemorethanoneyearuntilmaturityand(iii)FitchbelievesthattherelevantbankwilllendsuchamountstakingintoaccountbreachofcovenantorotherconsiderationscanbeincludedasasourceofliquidityNotallcountrieshavesuchlong-termcommittedbankfundingfacilities
Gross debt and net debt
Gross interest and net interest paid
Debtrepresentstotaldebtorgrossdebtwhilenetdebtistotaldebtminus(freelyavailableunrestricted)cashbasedonFitchrsquosreadilyavailablecashThisldquofreelyavailablecashrdquomaybeadjustedforrestrictedorblockedcashoperationalcashrequirementswithinthegroupandotherformsofcashnotfreelyavailablefordebtreductionRecognising theculturaldifferences in theapproachofanalystsand investorsworldwideFitchevaluatesvariousdebtmeasuresonbothagrossandnetdebtbasisDistinctionsarealsomadebetweentotalinterestandnetinterestpaid
SourceFitchRatings
fitchratingscom 5
Main Leverage and Coverage Ratios
FFO interest coverage
This isacentralmeasureofthefinancialflexibilityofanentity Itcomparestheoperationalcash-generatingabilityofanissuer(aftertax)toitsfinancingcostsManyfactorsinfluencecoverageincludingtherelativelevelsofinterestratesindifferentjurisdictionsthemixoffixed-rateversusfloating-ratefundingandtheuseofzero-couponorpayment-in-kind(PIK)debtForthisreasonthecoverageratiosshouldbeconsideredalongsidetheappropriateleverageratios
FFO fixed-charge coverage
Thismeasureoffinancialflexibility isofparticular relevance forentities thathavematerial levelsof leasefinancing It is important to note that this ratio inherently produces amore conservative result than aninterest cover calculation (ie coverage ratios on debt-funded and lease-funded capital structure are notdirectlycomparable) as theentiretyof the rentalexpenditure (ie theequivalentof interestandprincipalamortisation)isincludedinboththenumeratoranddenominator
FCF debt-service coverage
This is ameasureof theabilityof an issuer tomeetdebt serviceobligations both interest andprincipalfromorganiccashgenerationaftercapitalexpenditurendashandassumingtheservicingofequitycapitalThisindicatestheentityrsquosrelianceuponeitherrefinancinginthedebtorequitymarketsoruponconservationofcashachievedthroughreducingcommondividendsorcapitalexpenditureorbyothermeans
FFO (net) adjusted leverage or total adjusted debtoperating EBITDAR
Thisratioisameasureofthedebtburdenofanentityrelativetoitscash-generatingabilityThismeasureusesa lease-adjusteddebtequivalentandtakesaccountofequitycreditdeductedfromhybriddebtsecuritiesthatmaydisplayequity-likefeaturesandotheroff-balance-sheetdebtLeasesarecapitalisedasamultipleofestimatedrentalexpnsewiththemultipledependingontheindustryandinterest-rateenvironmentaslaidoutinAppendix11exceptforinthetransportationsectorswheretheIFRS16ASC842disclosedleaseliabilityisusedEBITDARbasedratiosarecomputedafterrecurringdividendsreceivedfromassociatesequitymethodinvestmentsanddividendspaidtominorities(oralternativelynetincomeattributabletominorities)
FFO (net) leverage or total debt with equity creditoperating EBITDA
Theseratiosarehaveasimilarfunctionasandaredefinedverysimilarlytotheadjustedratiosalthoughtheyexcludelease-equivalentdebtinthenumeratorandorrentalexpenseinthedenominatorTheseratiosareespeciallyrelevantforissuersthatoperateinasectorthatusestheleases-opexapproach(seeAppendix1forfurtherdetails)LikeEBITDAREBITDAiscomputedafterrecurringdivdiendsarereceivedfromassociatesequitymethod investments anddividendspaid tominorities (or alternatively net incomeattributable tominorities)
Pension-adjusted leverage
Ifoveranumberofyearspension-adjustedratiosaresignificantlyhigherthantheirunadjustedcounterpartsfurther investigation is performed to understand the broader risks posed to the company by its pensionschemeincludingacompanyrsquosfundingobligationsinthejurisdictionsinwhichitoperatestherisksinherentinitsfundingstrategyandmdashimportantlymdashtheimplicationsthesehaveforthecashdrainonthecompanyrsquosresources
SourceFitchRatings
fitchratingscom 6
Financial Terms and RatiosMain Terms
Fitch-defined term Definition
OperatingEBIT GrossProfit-SGampAorOampMExpense-RampDExpense-ProvisionforBadDebts-DepreciationofTangibleassets -Amortisationof IntangibleAssets - -DepreciationofLeasedAssetsndash InterestChargeonLeaseLiabilities - OtherDepreciationandAmortizationexcludedfromSGampAndash Impairments included inEBITDA -Pre-OpeningampExplorationExpense -RegulatoryFees+OtherOperatingIncome(Expenses)-SecuritisationAmortisation
OperatingEBITDA Operating EBIT + adjustment for Non-RecurringNon-Recourse items +non-leasedepreciationampamortisation+analystadjustmentstoEBITDA
OperatingEBITDAR OperatingEBITDA+estimatedOperatingLeaseExpense
CashFlowFromOperations(CFO) NetIncome+TotalAdjustmentstoNetIncome+ChangeinWorkingCapital+RecurringCash Dividends Received from AssociatesEquity Method Investments + Investing ampFinancingCashFlowdeemedasOperating-DividendsPaidtoPreferredShareholders-DistributionstoNon-ControllingInterests
Fitchdefinedworkingcapital ChangeinReceivables+Changeintradepayables+ChangeinAccruedExpenses+anyotherchangesinwcap
FundsFromOperation(FFO) CashFlowFromOperations(CFO)-ChangeinFitch-definedWorkingCapital
FreeCashFlow(FCF) Cash Flow from Operations - Capital Expenditures - Common Dividends + Total Non-OperatingampNon-RecurringCashFlowbeforebusinessacquisitionbusinessdivestmentsandsharebuybackspecialdividends
Totaldebt TotalSecuredDebt+TotalUnsecuredDebt+TotalSubordinatedDebt+PreferredStock+Short-termnon-recourseDebt+Long-ternnon-recourseDebt+SecuritisationDebt+NetDerivative(assets)liabilitiesHedgingPrincipalBorrowings
Totaldebtwithequitycredit TotalDebt-EquityCredit
Totaladjusteddebtwithequitycredit TotalDebtwithEquityCredit+LeaseequivalentDebt+OtheroffBalanceSheetDebt
Readilyavailablecashampequivalents Cash+MarketableSecurities -Cash reportedasRestrictedorBlocked -CashdeemedbyFitchasnot readilyavailable (includingadjustments forminimumcash required forongoingoperationssuchasseasonalityWorkingCapitalfluctuationsandCashHeldbynotWhollyOwnedorNon-RecourseSubsidiariesorinOffshoreHoldings)
Netadjusteddebtwithequitycredit TotalAdjustedDebtwithEquityCredit-ReadilyAvailableCashampEquivalents
Interestpaidreceived CashinterestisusedincoverageratiosbutifInterestPaidorInterestReceivedequalzerothenInterestExpenseandInterestIncomeasperthePampLisusedinstead
SourceFitchRatings
fitchratingscom 7
Main Ratios
Ratio Numerator Denominator
Profitabilitycash flow ratios
EBITmargin OperatingEBIT Revenues
EBITmargin-Group OperatingEBITincludingfinancialservicesoperations
Consolidatedrevenues
EBITmargin-Industrial OperatingEBITexcludingfinancialservicesoperations
Industrialoperationrevenues
OperatingEBITDARmargin OperatingEBITDAR Revenues
FFOmargin FFO Revenues
FCFmargin FreeCashFlow Revenues
CapexCFO CapitalExpenditure CashFlowfromOperations
CFOmargin CashFlowFromOperations Revenues
Leverage ratios
TotaladjusteddebtopEBITDAR(x)
TotalAdjustedDebtwithEquityCredit
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
TotaladjustednetdebtopEBITDAR(x)
NetAdjustedDebtwithEquityCredit OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
FFOadjustedleverage(x) TotalAdjustedDebtwithEquityCredit
FundsFromOperations[FFO]+InterestPaid-InterestReceived+PreferredDividends(Paid)+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOadjustednetleverage(x) NetAdjustedDebtwithEquityCredit FundsFromOperations[FFO]+InterestPaid-InterestReceived+PreferredDividends(Paid)+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOleverage(x) TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt
FundsFromOperations[FFO]+InterestPaidndashInterestReceived+PreferredDividends(Paid)
FFOnetleverage(x) TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebtndashReadilyAvailableCashampEquivalents
FundsFromOperations[FFO]+InterestPaidndashInterestReceived+PreferredDividends(Paid)
(CFOndashCapEx)TotalDebtwithEquityCredit()
CashFlowfromOperations[CFO]ndashCapital(Expenditures)
TotalAdjustedDebtwithEquityCredit-LeaseEquivalentDebt
(CFOndashCapEx)TotalNetDebtwithEquityCredit()
CashFlowfromOperations[CFO]ndashCapital(Expenditures)
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebtndashReadilyAvailableCashampEquivalents
FCFtotaladjusteddebt() FreeCashFlow TotalAdjustedDebtwithEquityCredit
SourceFitchRatings
fitchratingscom 8
Main Ratios (Cont)
Ratio Numerator Denominator
TotaldebtwithequitycreditopEBITDA(x)
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt
OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
TotalnetdebtwithequitycreditoperatingEBITDA
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt-ReadilyAvailableCashampEquivalents
OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
Totaladjdebt(CFObeforeleaseexpense-MaintCapEx)(x)
TotalAdjustedDebtwithEquityCredit CashFlowFromOperations[CFO]+OperatingLeaseExpenseforCapitalisedLeasedAssets-MaintenanceCapex(totalcapexusedifmaintenancecapexunavailable)
Coverage ratios
FFOfixed-chargecoverage(x) FFO+Interestpaid-interestreceived+PreferredDividendspaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
InterestPaid+PreferredDividendsPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOinterestcoverage(x) FFO+Interestpaidminusinterestreceived+PreferredDividendspaid
InterestPaid+PreferredDividendsPaid
OperatingEBITDARgrossinterestpaid+rents(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
OperatingEBITDARnetinterestpaid+rents(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid-InterestReceived+OperatingLeaseExpenseforCapitalisedLeasedAssets
OpEBITDAinterestpaid(x) OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid
SourceFitchRatings
fitchratingscom 9
Main Ratios (Cont)
Ratio Numerator Denominator
OpEBITDAR(interestpaid+leaseexpense)(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
CFOcapitalexpenditures(x) CashFlowfromOperations[CFO] Capital(Expenditures)
CapexCFO() Capital(Expenditures) CashFlowfromOperations[CFO]
Liquidity ratios
FFOdebtservicecover FFO+Interestpaidminusinterestreceived+PreferredDividends+OperatingLeaseExpenseforCapitalisedLeasedAssets
InterestPaid+PreferredDividends+CurrentDebtMaturities
Liquidity(liquidityratio) Availablecash+undrawnportionofcommittedfacilities+FCF
12-monthdebtMaturities
SourceFitchRatings
fitchratingscom 10
Fitch encourages an analytical climate where financialstatements are regarded as a source material providingbroad indications of the financial position rather than as acomprehensive registerof immutable factsThe limitationsofthesourcematerialndashcorporategroupfinancialstatementsndasharemanyandvaried
Forexampleitisnotunusualformajorgroupstobecomposedof hundreds of legal entities Financial statements presenta high-level consolidated picture but material differenceswillexistintheprecisefinancialpositionndashincomeexpenseobligations and cash-generating ability ndash of different legalentitieswithinaconsolidated group whichmay besweptupandmaskedbytheprocessofaccountingconsolidation
Similarly theapparentlysmoothandorderlysequentialflowof thepublishedincomeandcashflowdoes notreflectanactuallinearflowofpaymentsthroughacompanyrsquoshandsoralegalwaterfallofprioritiesbutratheraggregatesatheoreticalflowInpracticethecompanydoesnotwriteachequeforits
entireannualoperatingexpenditurefollowedthenextmonthby one amount for its annual interest bill followed by oneinstalmentforitstaxbillfollowedonlythenbyonepaymentforitsannualcapitalexpenditurebillandsoon
Furthermorefinancialstatementspresentonlyasnapshotofassetsandliabilitiesandaresubjecttooftenverybroadandsubjectivedecisionsonaccountingtreatments
Reflecting the aggregated and approximatenature of thesourcedata Fitchappliesa seriesof commonadjustmentsoutlined below Adjustments that are not material to thecreditanalysisdonothavetobemade
A detailed review of Fitchrsquos financial adjustments can be found in appendix 1 of Fitchrsquos criteria report for non-financial corporates httpswwwfitchratingscomresearchcorporate-financecorporate-rating-criteria-01-05-2020
Main Analytical Adjustments
fitchratingscom 11
Adjustments Description
Leases Creatinganequivalenceindebtmetricsforfinancingundertakenusingleasesinselectedsectors
Hybrids Measuringthedegreetowhichanissuancewithhybridfeaturesmayqualifyfortreatingas50of100equityinourleveragemetrics
Pensions Measuringtheimpactofpensionexposuresonourleverageandcashflowanalysis
DebtFactoring Adjustmentstoreflectthesaleofreceivablesinourdebtmetricsandrecoverygivendefaultanalysis
CashAdjustments Adjustmentstoreflectdifferentqualitiesofcashandotherliquidassets
AdjustingConsolidatedProfilesforGroupStructures
Adjustmentstoreflectthedegreeofownershipandcontrolofcashflowsfromvaryinglevelsofownershiporlegaloperationalseparation
HoldCoPIKandShareholderLoans MeasuringthedegreetowhichshareholderloansandPayment-in-Kindnoteswouldbetreatedaspartoftheratedentityrsquosleverageburden
DebtFair-ValueAdjustments Adjustmentstoensuredebtreviewedisthedebtwhichwillbepayableontheinstrumentrsquosmaturityassuminganentityremainsagoingconcern
AdjustmentsforFinancialServicesActivities
Adjustmentstofinancialservices(lsquoFSrsquo)operationswithincorporatestoreflectFitchrsquosassumptionthatdebtallocatedtotheFSoperationsisrepaidusingthecashflowoftheFSoperationsincludingassumptionsforanyimputedadditionalcapitalfortheFSbusinesswhichFitchmayassumetobeaddedtotheindustrialentityrsquosdebtburden
Contact Us
ALL FITCHCREDITRATINGSARESUBJECTTOCERTAINLIMITATIONSANDDISCLAIMERS PLEASEREADTHESELIMITATIONSANDDISCLAIMERSBY FOLLOWINGTHIS LINKHTTPSWWWFITCHRATINGSCOMSITEDEFINITIONS IN ADDITION RATING DEFINITIONS AND THE TERMSOF USEOF SUCH RATINGS ARE AVAILABLEON THE AGENCYrsquoS PUBLICWEB SITE ATWWWFITCHRATINGSCOMPUBLISHEDRATINGSCRITERIAANDMETHODOLOGIESAREAVAILABLEFROMTHISSITEATALLTIMESFITCHrsquoSCODEOFCONDUCTCONFIDENTIALITYCONFLICTSOFINTERESTAFFILIATEFIREWALLCOMPLIANCEANDOTHERRELEVANTPOLICIESANDPROCEDURESAREALSOAVAILABLEFROMTHECODEOFCONDUCTSECTIONOFTHISSITEFITCHMAYHAVEPROVIDEDANOTHERPERMISSIBLESERVICETOTHERATEDENTITYORITSRELATEDTHIRDPARTIESDETAILSOFTHISSERVICEFORRATINGSFORWHICHTHELEADANALYSTISBASEDINANEU-REGISTEREDENTITYCANBEFOUNDONTHEENTITYSUMMARYPAGEFORTHISISSUERONTHEFITCHWEBSITECopyrightcopy2020byFitchRatingsIncFitchRatingsLtdanditssubsidiaries33WhitehallStreetNYNY10004Telephone1-800-753-4824(212)908-0500Fax(212)480-4435ReproductionorretransmissioninwholeorinpartisprohibitedexceptbypermissionAllrightsreservedInissuingandmaintainingitsratingsandinmakingotherreports(includingforecastinformation)FitchreliesonfactualinformationitreceivesfromissuersandunderwritersandfromothersourcesFitchbelievestobecredibleFitchconductsareasonable investigationofthefactual informationrelieduponby it inaccordancewith itsratingsmethodologyandobtainsreasonableverificationofthatinformationfromindependentsourcestotheextentsuchsourcesareavailableforagivensecurityorinagivenjurisdictionThemannerofFitchrsquosfactualinvestigationandthescopeofthethird-partyverificationitobtainswillvarydependingonthenatureoftheratedsecurityanditsissuertherequirementsandpracticesinthejurisdictioninwhichtheratedsecurityisofferedandsoldandortheissuerislocatedtheavailabilityandnatureofrelevantpublicinformationaccesstothemanagementoftheissueranditsadviserstheavailabilityofpre-existingthird-partyverificationssuchasauditreportsagreed-uponprocedureslettersappraisalsactuarialreportsengineeringreportslegalopinionsandotherreportsprovidedbythirdpartiestheavailabilityofindependentandcompetentthird-partyverificationsourceswithrespecttotheparticularsecurityorintheparticularjurisdictionoftheissuerandavarietyofotherfactorsUsersofFitchrsquosratingsandreportsshouldunderstandthatneitheranenhancedfactualinvestigationnoranythird-partyverificationcanensurethatalloftheinformationFitchreliesoninconnectionwitharatingorareportwillbeaccurateandcompleteUltimatelytheissueranditsadvisersareresponsiblefortheaccuracyoftheinformationtheyprovidetoFitchandtothemarketinofferingdocumentsandotherreportsInissuingitsratingsanditsreportsFitchmustrelyontheworkofexpertsincludingindependentauditorswithrespecttofinancialstatementsandattorneyswithrespecttolegalandtaxmattersFurtherratingsandforecastsoffinancialandotherinformationareinherentlyforward-lookingandembodyassumptionsandpredictionsaboutfutureeventsthatbytheirnaturecannotbeverifiedasfactsAsaresultdespiteanyverificationofcurrentfactsratingsandforecastscanbeaffectedbyfutureeventsorconditionsthatwerenotanticipatedatthetimearatingorforecastwasissuedoraffirmedTheinformationinthisreportisprovidedldquoasisrdquowithoutanyrepresentationorwarrantyofanykindandFitchdoesnotrepresentorwarrantthatthereportoranyofitscontentswillmeetanyoftherequirementsofarecipientofthereportAFitchratingisanopinionastothecreditworthinessofasecurityThisopinionandreportsmadebyFitcharebasedonestablishedcriteriaandmethodologiesthatFitchiscontinuouslyevaluatingandupdatingThereforeratingsandreportsarethecollectiveworkproductofFitchandnoindividualorgroupofindividualsissolelyresponsibleforaratingorareportTheratingdoesnotaddresstheriskoflossduetorisksotherthancreditriskunlesssuchriskisspecificallymentionedFitchisnotengagedintheofferorsaleofanysecurityAllFitchreportshavesharedauthorshipIndividualsidentifiedinaFitchreportwereinvolvedinbutarenotsolelyresponsiblefortheopinionsstatedthereinTheindividualsarenamedforcontactpurposesonlyAreportprovidingaFitchratingisneitheraprospectusnorasubstitutefortheinformationassembledverifiedandpresentedtoinvestorsbytheissueranditsagentsinconnectionwiththesaleofthesecuritiesRatingsmaybechangedorwithdrawnatanytimeforanyreasoninthesolediscretionofFitchFitchdoesnotprovideinvestmentadviceofanysortRatingsarenotarecommendationtobuysellorholdanysecurityRatingsdonotcommentontheadequacyofmarketpricethesuitabilityofanysecurityforaparticularinvestororthetax-exemptnatureortaxabilityofpaymentsmadeinrespecttoanysecurityFitchreceivesfeesfromissuersinsurersguarantorsotherobligorsandunderwritersforratingsecuritiesSuchfeesgenerallyvaryfromUS$1000toUS$750000(ortheapplicablecurrencyequivalent)perissueIncertaincasesFitchwillratealloranumberofissuesissuedbyaparticularissuerorinsuredorguaranteedbyaparticularinsurerorguarantorforasingleannualfeeSuchfeesareexpectedtovaryfromUS$10000toUS$1500000(ortheapplicablecurrencyequivalent)TheassignmentpublicationordisseminationofaratingbyFitchshallnotconstituteaconsentbyFitchtouseitsnameasanexpertinconnectionwithanyregistrationstatementfiledundertheUnitedStatessecuritieslawstheFinancialServicesandMarketsActof2000oftheUnitedKingdomorthesecuritieslawsofanyparticularjurisdictionDuetotherelativeefficiencyofelectronicpublishinganddistributionFitchresearchmaybeavailabletoelectronicsubscribersuptothreedaysearlierthantoprintsubscribersForAustraliaNewZealandTaiwanandSouthKoreaonlyFitchAustraliaPtyLtdholdsanAustralianfinancialserviceslicense(AFSlicenseno337123)whichauthorizesittoprovidecreditratingstowholesaleclientsonlyCreditratingsinformationpublishedbyFitchisnotintendedtobeusedbypersonswhoareretailclientswithinthemeaningoftheCorporationsAct2001DC-177
Scott CassieSeniorDirectorHead-NorthAmericanCorporatesIssuerBusinessRelationshipManagementFitchRatings300West57StNewYorkNY10019scottcassiefitchratingscom Tom Muoio ManagingDirectorCorporatesandStructuredCreditBusinessRelationshipManagementFitch Ratings 30 North Colonnade Canary Wharf LondonE145GNUKtommuoiofitchratingscom
Kathleen Fuentes HoltzmanManagingDirectorLatinAmericaFitchRatings300West57thStreetNewYorkNYkathleenholtzmanfitchratingscom
Ng Sing Chan ManagingDirectorHeadofAPACBusinessOriginationFitchRatings1RafflesQuaySingapore048583singchanngfitchratingscom
fitchratingscom 4
Definitions of Key Concepts
Operating EBITDA and EBITDAR
OperatingEBITDAisawidelyusedmeasureofanissuerrsquosunleverageduntaxedcash-generatingcapacityfromoperatingactivitiesFitchusuallyexcludesextraordinaryitemssuchasassetwrite-downsandrestructuringsincalculatingoperatingEBITDAmdashunlessanissuerhasrecurringone-timechargeswhichindicatetheitemsarenotunusualinnatureFitchwouldalsoexcludemovementsinfairvaluecontainedinoperatingprofit
FitchrsquosoperatingEBITDAiscomputedafterdeductingestimatedrentalexpensebasedonthedepreciationofleasedassetsplusinterestonleaseliabilities
Theuseof operating EBITDAplus estimated rental expense (EBITDAR includingoperating lease payments)improvescomparabilityacrossindustries(egretailandmanufacturing)thatexhibitdifferentaveragelevelsofleasefinancingandwithinindustries(egairlines)wheresomecompaniesuseleasefinancingmorethanothers
Funds flow from operations Post-interestandtaxpre-workingcapital
FFOisthefundamentalmeasureofthefirmrsquoscashflowaftermeetingoperatingexpensesincludingestimatedrentalexpensetaxesandinterestFFOismeasuredaftercashpaymentsfortaxescashreceivedfromassociatesinterestandpreferreddividendspaidandafterdividendspaidtominorityinterestsbutbeforeinflowsoroutflowsrelatedtoworkingcapitalFitchrsquoscomputationsubtractsoraddsbackanamounttoexcludenon-coreornon-operationalcashinfloworoutflowFFOoffersonemeasureofanissuerrsquosoperationalcash-generatingabilitybeforereinvestmentandbeforethevolatilityofworkingcapitalWhenusedininterestcoverageandleverageratiosnetinterestisaddedbacktothenumerator
Working capital Fitchcalculatesthechangeinworkingcapitalthroughtheannualswingsintradereceivablestradeinventorytradepayablesandanyotherrelevantworking-capitalitemItalsoincludesanalyticaladjustmentsthataffectworkingcapitalsuchasfactoringwheresoldreceivablesareaddedbacktotradereceivablestoreversetheeffectsoffactoringonworkingcapital
Cash flow from operations Post-interesttaxandworkingcapital
CFO represents the cash flow available from core operations after all payments for ongoing operationalrequirementsestimatedrentalexpensecashreceivedfromassociatesdividendspaidtominorityinterestsinterestpaidinterestreceivedpreferencedividendsandtaxCFOisalsomeasuredbeforereinvestmentinthebusiness throughcapitalexpenditurebefore receipts fromassetdisposalsbeforeanyacquisitionsorbusinessdivestmentandbeforetheservicingofequitywithdividendsorthebuybackorissuanceofequity
Free cash flow Post-interesttaxworkingcapitalcapitalexpendituresanddividends
FCFisthethirdkeycash-flowmeasureinthechainItmeasuresanissuerrsquoscashfromoperationsaftercapitalexpenditurenon-recurringornon-operationalexpenditure anddividends It alsomeasures thecashflowgeneratedbeforeaccountistakenofbusinessacquisitionsbusinessdivestmentsandanydecisionbytheissuertoissueorbuybackequityormakeaspecialdividend
Liquidity Factorsthatcontributetofinancialflexibilityaretheabilitytoreviseplansforcapitalspendingstrongbankingrelationshipsthedegreeofaccesstoarangeofdebtandequitymarketscommittedlong-datedbanklinesandtheproportionofshort-termdebtinthecapitalstructureTheseissuesareincorporatedintheliquidityconceptThe liquidityscore iscalculatedastheamountofreadilyavailablecashtoserviceormeetdebtand interestobligationsincludingavailabilityundercommittedlinesofcreditandaftertakingintoaccountdebtmaturitieswithinoneyearandalsofactoringexpectedfreecash-flowgenerationoverthecomingyear
Committed bank facilities
Incorporateanalysismdashandparticularfinancialratiosmdashsourcesofliquidityincludeheadroomorundrawnfunds under committed bank facilities relevant for the period Bank facilities which (i) are a contractualcommitmenttolend(ii)havemorethanoneyearuntilmaturityand(iii)FitchbelievesthattherelevantbankwilllendsuchamountstakingintoaccountbreachofcovenantorotherconsiderationscanbeincludedasasourceofliquidityNotallcountrieshavesuchlong-termcommittedbankfundingfacilities
Gross debt and net debt
Gross interest and net interest paid
Debtrepresentstotaldebtorgrossdebtwhilenetdebtistotaldebtminus(freelyavailableunrestricted)cashbasedonFitchrsquosreadilyavailablecashThisldquofreelyavailablecashrdquomaybeadjustedforrestrictedorblockedcashoperationalcashrequirementswithinthegroupandotherformsofcashnotfreelyavailablefordebtreductionRecognising theculturaldifferences in theapproachofanalystsand investorsworldwideFitchevaluatesvariousdebtmeasuresonbothagrossandnetdebtbasisDistinctionsarealsomadebetweentotalinterestandnetinterestpaid
SourceFitchRatings
fitchratingscom 5
Main Leverage and Coverage Ratios
FFO interest coverage
This isacentralmeasureofthefinancialflexibilityofanentity Itcomparestheoperationalcash-generatingabilityofanissuer(aftertax)toitsfinancingcostsManyfactorsinfluencecoverageincludingtherelativelevelsofinterestratesindifferentjurisdictionsthemixoffixed-rateversusfloating-ratefundingandtheuseofzero-couponorpayment-in-kind(PIK)debtForthisreasonthecoverageratiosshouldbeconsideredalongsidetheappropriateleverageratios
FFO fixed-charge coverage
Thismeasureoffinancialflexibility isofparticular relevance forentities thathavematerial levelsof leasefinancing It is important to note that this ratio inherently produces amore conservative result than aninterest cover calculation (ie coverage ratios on debt-funded and lease-funded capital structure are notdirectlycomparable) as theentiretyof the rentalexpenditure (ie theequivalentof interestandprincipalamortisation)isincludedinboththenumeratoranddenominator
FCF debt-service coverage
This is ameasureof theabilityof an issuer tomeetdebt serviceobligations both interest andprincipalfromorganiccashgenerationaftercapitalexpenditurendashandassumingtheservicingofequitycapitalThisindicatestheentityrsquosrelianceuponeitherrefinancinginthedebtorequitymarketsoruponconservationofcashachievedthroughreducingcommondividendsorcapitalexpenditureorbyothermeans
FFO (net) adjusted leverage or total adjusted debtoperating EBITDAR
Thisratioisameasureofthedebtburdenofanentityrelativetoitscash-generatingabilityThismeasureusesa lease-adjusteddebtequivalentandtakesaccountofequitycreditdeductedfromhybriddebtsecuritiesthatmaydisplayequity-likefeaturesandotheroff-balance-sheetdebtLeasesarecapitalisedasamultipleofestimatedrentalexpnsewiththemultipledependingontheindustryandinterest-rateenvironmentaslaidoutinAppendix11exceptforinthetransportationsectorswheretheIFRS16ASC842disclosedleaseliabilityisusedEBITDARbasedratiosarecomputedafterrecurringdividendsreceivedfromassociatesequitymethodinvestmentsanddividendspaidtominorities(oralternativelynetincomeattributabletominorities)
FFO (net) leverage or total debt with equity creditoperating EBITDA
Theseratiosarehaveasimilarfunctionasandaredefinedverysimilarlytotheadjustedratiosalthoughtheyexcludelease-equivalentdebtinthenumeratorandorrentalexpenseinthedenominatorTheseratiosareespeciallyrelevantforissuersthatoperateinasectorthatusestheleases-opexapproach(seeAppendix1forfurtherdetails)LikeEBITDAREBITDAiscomputedafterrecurringdivdiendsarereceivedfromassociatesequitymethod investments anddividendspaid tominorities (or alternatively net incomeattributable tominorities)
Pension-adjusted leverage
Ifoveranumberofyearspension-adjustedratiosaresignificantlyhigherthantheirunadjustedcounterpartsfurther investigation is performed to understand the broader risks posed to the company by its pensionschemeincludingacompanyrsquosfundingobligationsinthejurisdictionsinwhichitoperatestherisksinherentinitsfundingstrategyandmdashimportantlymdashtheimplicationsthesehaveforthecashdrainonthecompanyrsquosresources
SourceFitchRatings
fitchratingscom 6
Financial Terms and RatiosMain Terms
Fitch-defined term Definition
OperatingEBIT GrossProfit-SGampAorOampMExpense-RampDExpense-ProvisionforBadDebts-DepreciationofTangibleassets -Amortisationof IntangibleAssets - -DepreciationofLeasedAssetsndash InterestChargeonLeaseLiabilities - OtherDepreciationandAmortizationexcludedfromSGampAndash Impairments included inEBITDA -Pre-OpeningampExplorationExpense -RegulatoryFees+OtherOperatingIncome(Expenses)-SecuritisationAmortisation
OperatingEBITDA Operating EBIT + adjustment for Non-RecurringNon-Recourse items +non-leasedepreciationampamortisation+analystadjustmentstoEBITDA
OperatingEBITDAR OperatingEBITDA+estimatedOperatingLeaseExpense
CashFlowFromOperations(CFO) NetIncome+TotalAdjustmentstoNetIncome+ChangeinWorkingCapital+RecurringCash Dividends Received from AssociatesEquity Method Investments + Investing ampFinancingCashFlowdeemedasOperating-DividendsPaidtoPreferredShareholders-DistributionstoNon-ControllingInterests
Fitchdefinedworkingcapital ChangeinReceivables+Changeintradepayables+ChangeinAccruedExpenses+anyotherchangesinwcap
FundsFromOperation(FFO) CashFlowFromOperations(CFO)-ChangeinFitch-definedWorkingCapital
FreeCashFlow(FCF) Cash Flow from Operations - Capital Expenditures - Common Dividends + Total Non-OperatingampNon-RecurringCashFlowbeforebusinessacquisitionbusinessdivestmentsandsharebuybackspecialdividends
Totaldebt TotalSecuredDebt+TotalUnsecuredDebt+TotalSubordinatedDebt+PreferredStock+Short-termnon-recourseDebt+Long-ternnon-recourseDebt+SecuritisationDebt+NetDerivative(assets)liabilitiesHedgingPrincipalBorrowings
Totaldebtwithequitycredit TotalDebt-EquityCredit
Totaladjusteddebtwithequitycredit TotalDebtwithEquityCredit+LeaseequivalentDebt+OtheroffBalanceSheetDebt
Readilyavailablecashampequivalents Cash+MarketableSecurities -Cash reportedasRestrictedorBlocked -CashdeemedbyFitchasnot readilyavailable (includingadjustments forminimumcash required forongoingoperationssuchasseasonalityWorkingCapitalfluctuationsandCashHeldbynotWhollyOwnedorNon-RecourseSubsidiariesorinOffshoreHoldings)
Netadjusteddebtwithequitycredit TotalAdjustedDebtwithEquityCredit-ReadilyAvailableCashampEquivalents
Interestpaidreceived CashinterestisusedincoverageratiosbutifInterestPaidorInterestReceivedequalzerothenInterestExpenseandInterestIncomeasperthePampLisusedinstead
SourceFitchRatings
fitchratingscom 7
Main Ratios
Ratio Numerator Denominator
Profitabilitycash flow ratios
EBITmargin OperatingEBIT Revenues
EBITmargin-Group OperatingEBITincludingfinancialservicesoperations
Consolidatedrevenues
EBITmargin-Industrial OperatingEBITexcludingfinancialservicesoperations
Industrialoperationrevenues
OperatingEBITDARmargin OperatingEBITDAR Revenues
FFOmargin FFO Revenues
FCFmargin FreeCashFlow Revenues
CapexCFO CapitalExpenditure CashFlowfromOperations
CFOmargin CashFlowFromOperations Revenues
Leverage ratios
TotaladjusteddebtopEBITDAR(x)
TotalAdjustedDebtwithEquityCredit
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
TotaladjustednetdebtopEBITDAR(x)
NetAdjustedDebtwithEquityCredit OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
FFOadjustedleverage(x) TotalAdjustedDebtwithEquityCredit
FundsFromOperations[FFO]+InterestPaid-InterestReceived+PreferredDividends(Paid)+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOadjustednetleverage(x) NetAdjustedDebtwithEquityCredit FundsFromOperations[FFO]+InterestPaid-InterestReceived+PreferredDividends(Paid)+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOleverage(x) TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt
FundsFromOperations[FFO]+InterestPaidndashInterestReceived+PreferredDividends(Paid)
FFOnetleverage(x) TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebtndashReadilyAvailableCashampEquivalents
FundsFromOperations[FFO]+InterestPaidndashInterestReceived+PreferredDividends(Paid)
(CFOndashCapEx)TotalDebtwithEquityCredit()
CashFlowfromOperations[CFO]ndashCapital(Expenditures)
TotalAdjustedDebtwithEquityCredit-LeaseEquivalentDebt
(CFOndashCapEx)TotalNetDebtwithEquityCredit()
CashFlowfromOperations[CFO]ndashCapital(Expenditures)
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebtndashReadilyAvailableCashampEquivalents
FCFtotaladjusteddebt() FreeCashFlow TotalAdjustedDebtwithEquityCredit
SourceFitchRatings
fitchratingscom 8
Main Ratios (Cont)
Ratio Numerator Denominator
TotaldebtwithequitycreditopEBITDA(x)
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt
OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
TotalnetdebtwithequitycreditoperatingEBITDA
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt-ReadilyAvailableCashampEquivalents
OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
Totaladjdebt(CFObeforeleaseexpense-MaintCapEx)(x)
TotalAdjustedDebtwithEquityCredit CashFlowFromOperations[CFO]+OperatingLeaseExpenseforCapitalisedLeasedAssets-MaintenanceCapex(totalcapexusedifmaintenancecapexunavailable)
Coverage ratios
FFOfixed-chargecoverage(x) FFO+Interestpaid-interestreceived+PreferredDividendspaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
InterestPaid+PreferredDividendsPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOinterestcoverage(x) FFO+Interestpaidminusinterestreceived+PreferredDividendspaid
InterestPaid+PreferredDividendsPaid
OperatingEBITDARgrossinterestpaid+rents(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
OperatingEBITDARnetinterestpaid+rents(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid-InterestReceived+OperatingLeaseExpenseforCapitalisedLeasedAssets
OpEBITDAinterestpaid(x) OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid
SourceFitchRatings
fitchratingscom 9
Main Ratios (Cont)
Ratio Numerator Denominator
OpEBITDAR(interestpaid+leaseexpense)(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
CFOcapitalexpenditures(x) CashFlowfromOperations[CFO] Capital(Expenditures)
CapexCFO() Capital(Expenditures) CashFlowfromOperations[CFO]
Liquidity ratios
FFOdebtservicecover FFO+Interestpaidminusinterestreceived+PreferredDividends+OperatingLeaseExpenseforCapitalisedLeasedAssets
InterestPaid+PreferredDividends+CurrentDebtMaturities
Liquidity(liquidityratio) Availablecash+undrawnportionofcommittedfacilities+FCF
12-monthdebtMaturities
SourceFitchRatings
fitchratingscom 10
Fitch encourages an analytical climate where financialstatements are regarded as a source material providingbroad indications of the financial position rather than as acomprehensive registerof immutable factsThe limitationsofthesourcematerialndashcorporategroupfinancialstatementsndasharemanyandvaried
Forexampleitisnotunusualformajorgroupstobecomposedof hundreds of legal entities Financial statements presenta high-level consolidated picture but material differenceswillexistintheprecisefinancialpositionndashincomeexpenseobligations and cash-generating ability ndash of different legalentitieswithinaconsolidated group whichmay besweptupandmaskedbytheprocessofaccountingconsolidation
Similarly theapparentlysmoothandorderlysequentialflowof thepublishedincomeandcashflowdoes notreflectanactuallinearflowofpaymentsthroughacompanyrsquoshandsoralegalwaterfallofprioritiesbutratheraggregatesatheoreticalflowInpracticethecompanydoesnotwriteachequeforits
entireannualoperatingexpenditurefollowedthenextmonthby one amount for its annual interest bill followed by oneinstalmentforitstaxbillfollowedonlythenbyonepaymentforitsannualcapitalexpenditurebillandsoon
Furthermorefinancialstatementspresentonlyasnapshotofassetsandliabilitiesandaresubjecttooftenverybroadandsubjectivedecisionsonaccountingtreatments
Reflecting the aggregated and approximatenature of thesourcedata Fitchappliesa seriesof commonadjustmentsoutlined below Adjustments that are not material to thecreditanalysisdonothavetobemade
A detailed review of Fitchrsquos financial adjustments can be found in appendix 1 of Fitchrsquos criteria report for non-financial corporates httpswwwfitchratingscomresearchcorporate-financecorporate-rating-criteria-01-05-2020
Main Analytical Adjustments
fitchratingscom 11
Adjustments Description
Leases Creatinganequivalenceindebtmetricsforfinancingundertakenusingleasesinselectedsectors
Hybrids Measuringthedegreetowhichanissuancewithhybridfeaturesmayqualifyfortreatingas50of100equityinourleveragemetrics
Pensions Measuringtheimpactofpensionexposuresonourleverageandcashflowanalysis
DebtFactoring Adjustmentstoreflectthesaleofreceivablesinourdebtmetricsandrecoverygivendefaultanalysis
CashAdjustments Adjustmentstoreflectdifferentqualitiesofcashandotherliquidassets
AdjustingConsolidatedProfilesforGroupStructures
Adjustmentstoreflectthedegreeofownershipandcontrolofcashflowsfromvaryinglevelsofownershiporlegaloperationalseparation
HoldCoPIKandShareholderLoans MeasuringthedegreetowhichshareholderloansandPayment-in-Kindnoteswouldbetreatedaspartoftheratedentityrsquosleverageburden
DebtFair-ValueAdjustments Adjustmentstoensuredebtreviewedisthedebtwhichwillbepayableontheinstrumentrsquosmaturityassuminganentityremainsagoingconcern
AdjustmentsforFinancialServicesActivities
Adjustmentstofinancialservices(lsquoFSrsquo)operationswithincorporatestoreflectFitchrsquosassumptionthatdebtallocatedtotheFSoperationsisrepaidusingthecashflowoftheFSoperationsincludingassumptionsforanyimputedadditionalcapitalfortheFSbusinesswhichFitchmayassumetobeaddedtotheindustrialentityrsquosdebtburden
Contact Us
ALL FITCHCREDITRATINGSARESUBJECTTOCERTAINLIMITATIONSANDDISCLAIMERS PLEASEREADTHESELIMITATIONSANDDISCLAIMERSBY FOLLOWINGTHIS LINKHTTPSWWWFITCHRATINGSCOMSITEDEFINITIONS IN ADDITION RATING DEFINITIONS AND THE TERMSOF USEOF SUCH RATINGS ARE AVAILABLEON THE AGENCYrsquoS PUBLICWEB SITE ATWWWFITCHRATINGSCOMPUBLISHEDRATINGSCRITERIAANDMETHODOLOGIESAREAVAILABLEFROMTHISSITEATALLTIMESFITCHrsquoSCODEOFCONDUCTCONFIDENTIALITYCONFLICTSOFINTERESTAFFILIATEFIREWALLCOMPLIANCEANDOTHERRELEVANTPOLICIESANDPROCEDURESAREALSOAVAILABLEFROMTHECODEOFCONDUCTSECTIONOFTHISSITEFITCHMAYHAVEPROVIDEDANOTHERPERMISSIBLESERVICETOTHERATEDENTITYORITSRELATEDTHIRDPARTIESDETAILSOFTHISSERVICEFORRATINGSFORWHICHTHELEADANALYSTISBASEDINANEU-REGISTEREDENTITYCANBEFOUNDONTHEENTITYSUMMARYPAGEFORTHISISSUERONTHEFITCHWEBSITECopyrightcopy2020byFitchRatingsIncFitchRatingsLtdanditssubsidiaries33WhitehallStreetNYNY10004Telephone1-800-753-4824(212)908-0500Fax(212)480-4435ReproductionorretransmissioninwholeorinpartisprohibitedexceptbypermissionAllrightsreservedInissuingandmaintainingitsratingsandinmakingotherreports(includingforecastinformation)FitchreliesonfactualinformationitreceivesfromissuersandunderwritersandfromothersourcesFitchbelievestobecredibleFitchconductsareasonable investigationofthefactual informationrelieduponby it inaccordancewith itsratingsmethodologyandobtainsreasonableverificationofthatinformationfromindependentsourcestotheextentsuchsourcesareavailableforagivensecurityorinagivenjurisdictionThemannerofFitchrsquosfactualinvestigationandthescopeofthethird-partyverificationitobtainswillvarydependingonthenatureoftheratedsecurityanditsissuertherequirementsandpracticesinthejurisdictioninwhichtheratedsecurityisofferedandsoldandortheissuerislocatedtheavailabilityandnatureofrelevantpublicinformationaccesstothemanagementoftheissueranditsadviserstheavailabilityofpre-existingthird-partyverificationssuchasauditreportsagreed-uponprocedureslettersappraisalsactuarialreportsengineeringreportslegalopinionsandotherreportsprovidedbythirdpartiestheavailabilityofindependentandcompetentthird-partyverificationsourceswithrespecttotheparticularsecurityorintheparticularjurisdictionoftheissuerandavarietyofotherfactorsUsersofFitchrsquosratingsandreportsshouldunderstandthatneitheranenhancedfactualinvestigationnoranythird-partyverificationcanensurethatalloftheinformationFitchreliesoninconnectionwitharatingorareportwillbeaccurateandcompleteUltimatelytheissueranditsadvisersareresponsiblefortheaccuracyoftheinformationtheyprovidetoFitchandtothemarketinofferingdocumentsandotherreportsInissuingitsratingsanditsreportsFitchmustrelyontheworkofexpertsincludingindependentauditorswithrespecttofinancialstatementsandattorneyswithrespecttolegalandtaxmattersFurtherratingsandforecastsoffinancialandotherinformationareinherentlyforward-lookingandembodyassumptionsandpredictionsaboutfutureeventsthatbytheirnaturecannotbeverifiedasfactsAsaresultdespiteanyverificationofcurrentfactsratingsandforecastscanbeaffectedbyfutureeventsorconditionsthatwerenotanticipatedatthetimearatingorforecastwasissuedoraffirmedTheinformationinthisreportisprovidedldquoasisrdquowithoutanyrepresentationorwarrantyofanykindandFitchdoesnotrepresentorwarrantthatthereportoranyofitscontentswillmeetanyoftherequirementsofarecipientofthereportAFitchratingisanopinionastothecreditworthinessofasecurityThisopinionandreportsmadebyFitcharebasedonestablishedcriteriaandmethodologiesthatFitchiscontinuouslyevaluatingandupdatingThereforeratingsandreportsarethecollectiveworkproductofFitchandnoindividualorgroupofindividualsissolelyresponsibleforaratingorareportTheratingdoesnotaddresstheriskoflossduetorisksotherthancreditriskunlesssuchriskisspecificallymentionedFitchisnotengagedintheofferorsaleofanysecurityAllFitchreportshavesharedauthorshipIndividualsidentifiedinaFitchreportwereinvolvedinbutarenotsolelyresponsiblefortheopinionsstatedthereinTheindividualsarenamedforcontactpurposesonlyAreportprovidingaFitchratingisneitheraprospectusnorasubstitutefortheinformationassembledverifiedandpresentedtoinvestorsbytheissueranditsagentsinconnectionwiththesaleofthesecuritiesRatingsmaybechangedorwithdrawnatanytimeforanyreasoninthesolediscretionofFitchFitchdoesnotprovideinvestmentadviceofanysortRatingsarenotarecommendationtobuysellorholdanysecurityRatingsdonotcommentontheadequacyofmarketpricethesuitabilityofanysecurityforaparticularinvestororthetax-exemptnatureortaxabilityofpaymentsmadeinrespecttoanysecurityFitchreceivesfeesfromissuersinsurersguarantorsotherobligorsandunderwritersforratingsecuritiesSuchfeesgenerallyvaryfromUS$1000toUS$750000(ortheapplicablecurrencyequivalent)perissueIncertaincasesFitchwillratealloranumberofissuesissuedbyaparticularissuerorinsuredorguaranteedbyaparticularinsurerorguarantorforasingleannualfeeSuchfeesareexpectedtovaryfromUS$10000toUS$1500000(ortheapplicablecurrencyequivalent)TheassignmentpublicationordisseminationofaratingbyFitchshallnotconstituteaconsentbyFitchtouseitsnameasanexpertinconnectionwithanyregistrationstatementfiledundertheUnitedStatessecuritieslawstheFinancialServicesandMarketsActof2000oftheUnitedKingdomorthesecuritieslawsofanyparticularjurisdictionDuetotherelativeefficiencyofelectronicpublishinganddistributionFitchresearchmaybeavailabletoelectronicsubscribersuptothreedaysearlierthantoprintsubscribersForAustraliaNewZealandTaiwanandSouthKoreaonlyFitchAustraliaPtyLtdholdsanAustralianfinancialserviceslicense(AFSlicenseno337123)whichauthorizesittoprovidecreditratingstowholesaleclientsonlyCreditratingsinformationpublishedbyFitchisnotintendedtobeusedbypersonswhoareretailclientswithinthemeaningoftheCorporationsAct2001DC-177
Scott CassieSeniorDirectorHead-NorthAmericanCorporatesIssuerBusinessRelationshipManagementFitchRatings300West57StNewYorkNY10019scottcassiefitchratingscom Tom Muoio ManagingDirectorCorporatesandStructuredCreditBusinessRelationshipManagementFitch Ratings 30 North Colonnade Canary Wharf LondonE145GNUKtommuoiofitchratingscom
Kathleen Fuentes HoltzmanManagingDirectorLatinAmericaFitchRatings300West57thStreetNewYorkNYkathleenholtzmanfitchratingscom
Ng Sing Chan ManagingDirectorHeadofAPACBusinessOriginationFitchRatings1RafflesQuaySingapore048583singchanngfitchratingscom
fitchratingscom 5
Main Leverage and Coverage Ratios
FFO interest coverage
This isacentralmeasureofthefinancialflexibilityofanentity Itcomparestheoperationalcash-generatingabilityofanissuer(aftertax)toitsfinancingcostsManyfactorsinfluencecoverageincludingtherelativelevelsofinterestratesindifferentjurisdictionsthemixoffixed-rateversusfloating-ratefundingandtheuseofzero-couponorpayment-in-kind(PIK)debtForthisreasonthecoverageratiosshouldbeconsideredalongsidetheappropriateleverageratios
FFO fixed-charge coverage
Thismeasureoffinancialflexibility isofparticular relevance forentities thathavematerial levelsof leasefinancing It is important to note that this ratio inherently produces amore conservative result than aninterest cover calculation (ie coverage ratios on debt-funded and lease-funded capital structure are notdirectlycomparable) as theentiretyof the rentalexpenditure (ie theequivalentof interestandprincipalamortisation)isincludedinboththenumeratoranddenominator
FCF debt-service coverage
This is ameasureof theabilityof an issuer tomeetdebt serviceobligations both interest andprincipalfromorganiccashgenerationaftercapitalexpenditurendashandassumingtheservicingofequitycapitalThisindicatestheentityrsquosrelianceuponeitherrefinancinginthedebtorequitymarketsoruponconservationofcashachievedthroughreducingcommondividendsorcapitalexpenditureorbyothermeans
FFO (net) adjusted leverage or total adjusted debtoperating EBITDAR
Thisratioisameasureofthedebtburdenofanentityrelativetoitscash-generatingabilityThismeasureusesa lease-adjusteddebtequivalentandtakesaccountofequitycreditdeductedfromhybriddebtsecuritiesthatmaydisplayequity-likefeaturesandotheroff-balance-sheetdebtLeasesarecapitalisedasamultipleofestimatedrentalexpnsewiththemultipledependingontheindustryandinterest-rateenvironmentaslaidoutinAppendix11exceptforinthetransportationsectorswheretheIFRS16ASC842disclosedleaseliabilityisusedEBITDARbasedratiosarecomputedafterrecurringdividendsreceivedfromassociatesequitymethodinvestmentsanddividendspaidtominorities(oralternativelynetincomeattributabletominorities)
FFO (net) leverage or total debt with equity creditoperating EBITDA
Theseratiosarehaveasimilarfunctionasandaredefinedverysimilarlytotheadjustedratiosalthoughtheyexcludelease-equivalentdebtinthenumeratorandorrentalexpenseinthedenominatorTheseratiosareespeciallyrelevantforissuersthatoperateinasectorthatusestheleases-opexapproach(seeAppendix1forfurtherdetails)LikeEBITDAREBITDAiscomputedafterrecurringdivdiendsarereceivedfromassociatesequitymethod investments anddividendspaid tominorities (or alternatively net incomeattributable tominorities)
Pension-adjusted leverage
Ifoveranumberofyearspension-adjustedratiosaresignificantlyhigherthantheirunadjustedcounterpartsfurther investigation is performed to understand the broader risks posed to the company by its pensionschemeincludingacompanyrsquosfundingobligationsinthejurisdictionsinwhichitoperatestherisksinherentinitsfundingstrategyandmdashimportantlymdashtheimplicationsthesehaveforthecashdrainonthecompanyrsquosresources
SourceFitchRatings
fitchratingscom 6
Financial Terms and RatiosMain Terms
Fitch-defined term Definition
OperatingEBIT GrossProfit-SGampAorOampMExpense-RampDExpense-ProvisionforBadDebts-DepreciationofTangibleassets -Amortisationof IntangibleAssets - -DepreciationofLeasedAssetsndash InterestChargeonLeaseLiabilities - OtherDepreciationandAmortizationexcludedfromSGampAndash Impairments included inEBITDA -Pre-OpeningampExplorationExpense -RegulatoryFees+OtherOperatingIncome(Expenses)-SecuritisationAmortisation
OperatingEBITDA Operating EBIT + adjustment for Non-RecurringNon-Recourse items +non-leasedepreciationampamortisation+analystadjustmentstoEBITDA
OperatingEBITDAR OperatingEBITDA+estimatedOperatingLeaseExpense
CashFlowFromOperations(CFO) NetIncome+TotalAdjustmentstoNetIncome+ChangeinWorkingCapital+RecurringCash Dividends Received from AssociatesEquity Method Investments + Investing ampFinancingCashFlowdeemedasOperating-DividendsPaidtoPreferredShareholders-DistributionstoNon-ControllingInterests
Fitchdefinedworkingcapital ChangeinReceivables+Changeintradepayables+ChangeinAccruedExpenses+anyotherchangesinwcap
FundsFromOperation(FFO) CashFlowFromOperations(CFO)-ChangeinFitch-definedWorkingCapital
FreeCashFlow(FCF) Cash Flow from Operations - Capital Expenditures - Common Dividends + Total Non-OperatingampNon-RecurringCashFlowbeforebusinessacquisitionbusinessdivestmentsandsharebuybackspecialdividends
Totaldebt TotalSecuredDebt+TotalUnsecuredDebt+TotalSubordinatedDebt+PreferredStock+Short-termnon-recourseDebt+Long-ternnon-recourseDebt+SecuritisationDebt+NetDerivative(assets)liabilitiesHedgingPrincipalBorrowings
Totaldebtwithequitycredit TotalDebt-EquityCredit
Totaladjusteddebtwithequitycredit TotalDebtwithEquityCredit+LeaseequivalentDebt+OtheroffBalanceSheetDebt
Readilyavailablecashampequivalents Cash+MarketableSecurities -Cash reportedasRestrictedorBlocked -CashdeemedbyFitchasnot readilyavailable (includingadjustments forminimumcash required forongoingoperationssuchasseasonalityWorkingCapitalfluctuationsandCashHeldbynotWhollyOwnedorNon-RecourseSubsidiariesorinOffshoreHoldings)
Netadjusteddebtwithequitycredit TotalAdjustedDebtwithEquityCredit-ReadilyAvailableCashampEquivalents
Interestpaidreceived CashinterestisusedincoverageratiosbutifInterestPaidorInterestReceivedequalzerothenInterestExpenseandInterestIncomeasperthePampLisusedinstead
SourceFitchRatings
fitchratingscom 7
Main Ratios
Ratio Numerator Denominator
Profitabilitycash flow ratios
EBITmargin OperatingEBIT Revenues
EBITmargin-Group OperatingEBITincludingfinancialservicesoperations
Consolidatedrevenues
EBITmargin-Industrial OperatingEBITexcludingfinancialservicesoperations
Industrialoperationrevenues
OperatingEBITDARmargin OperatingEBITDAR Revenues
FFOmargin FFO Revenues
FCFmargin FreeCashFlow Revenues
CapexCFO CapitalExpenditure CashFlowfromOperations
CFOmargin CashFlowFromOperations Revenues
Leverage ratios
TotaladjusteddebtopEBITDAR(x)
TotalAdjustedDebtwithEquityCredit
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
TotaladjustednetdebtopEBITDAR(x)
NetAdjustedDebtwithEquityCredit OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
FFOadjustedleverage(x) TotalAdjustedDebtwithEquityCredit
FundsFromOperations[FFO]+InterestPaid-InterestReceived+PreferredDividends(Paid)+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOadjustednetleverage(x) NetAdjustedDebtwithEquityCredit FundsFromOperations[FFO]+InterestPaid-InterestReceived+PreferredDividends(Paid)+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOleverage(x) TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt
FundsFromOperations[FFO]+InterestPaidndashInterestReceived+PreferredDividends(Paid)
FFOnetleverage(x) TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebtndashReadilyAvailableCashampEquivalents
FundsFromOperations[FFO]+InterestPaidndashInterestReceived+PreferredDividends(Paid)
(CFOndashCapEx)TotalDebtwithEquityCredit()
CashFlowfromOperations[CFO]ndashCapital(Expenditures)
TotalAdjustedDebtwithEquityCredit-LeaseEquivalentDebt
(CFOndashCapEx)TotalNetDebtwithEquityCredit()
CashFlowfromOperations[CFO]ndashCapital(Expenditures)
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebtndashReadilyAvailableCashampEquivalents
FCFtotaladjusteddebt() FreeCashFlow TotalAdjustedDebtwithEquityCredit
SourceFitchRatings
fitchratingscom 8
Main Ratios (Cont)
Ratio Numerator Denominator
TotaldebtwithequitycreditopEBITDA(x)
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt
OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
TotalnetdebtwithequitycreditoperatingEBITDA
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt-ReadilyAvailableCashampEquivalents
OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
Totaladjdebt(CFObeforeleaseexpense-MaintCapEx)(x)
TotalAdjustedDebtwithEquityCredit CashFlowFromOperations[CFO]+OperatingLeaseExpenseforCapitalisedLeasedAssets-MaintenanceCapex(totalcapexusedifmaintenancecapexunavailable)
Coverage ratios
FFOfixed-chargecoverage(x) FFO+Interestpaid-interestreceived+PreferredDividendspaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
InterestPaid+PreferredDividendsPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOinterestcoverage(x) FFO+Interestpaidminusinterestreceived+PreferredDividendspaid
InterestPaid+PreferredDividendsPaid
OperatingEBITDARgrossinterestpaid+rents(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
OperatingEBITDARnetinterestpaid+rents(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid-InterestReceived+OperatingLeaseExpenseforCapitalisedLeasedAssets
OpEBITDAinterestpaid(x) OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid
SourceFitchRatings
fitchratingscom 9
Main Ratios (Cont)
Ratio Numerator Denominator
OpEBITDAR(interestpaid+leaseexpense)(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
CFOcapitalexpenditures(x) CashFlowfromOperations[CFO] Capital(Expenditures)
CapexCFO() Capital(Expenditures) CashFlowfromOperations[CFO]
Liquidity ratios
FFOdebtservicecover FFO+Interestpaidminusinterestreceived+PreferredDividends+OperatingLeaseExpenseforCapitalisedLeasedAssets
InterestPaid+PreferredDividends+CurrentDebtMaturities
Liquidity(liquidityratio) Availablecash+undrawnportionofcommittedfacilities+FCF
12-monthdebtMaturities
SourceFitchRatings
fitchratingscom 10
Fitch encourages an analytical climate where financialstatements are regarded as a source material providingbroad indications of the financial position rather than as acomprehensive registerof immutable factsThe limitationsofthesourcematerialndashcorporategroupfinancialstatementsndasharemanyandvaried
Forexampleitisnotunusualformajorgroupstobecomposedof hundreds of legal entities Financial statements presenta high-level consolidated picture but material differenceswillexistintheprecisefinancialpositionndashincomeexpenseobligations and cash-generating ability ndash of different legalentitieswithinaconsolidated group whichmay besweptupandmaskedbytheprocessofaccountingconsolidation
Similarly theapparentlysmoothandorderlysequentialflowof thepublishedincomeandcashflowdoes notreflectanactuallinearflowofpaymentsthroughacompanyrsquoshandsoralegalwaterfallofprioritiesbutratheraggregatesatheoreticalflowInpracticethecompanydoesnotwriteachequeforits
entireannualoperatingexpenditurefollowedthenextmonthby one amount for its annual interest bill followed by oneinstalmentforitstaxbillfollowedonlythenbyonepaymentforitsannualcapitalexpenditurebillandsoon
Furthermorefinancialstatementspresentonlyasnapshotofassetsandliabilitiesandaresubjecttooftenverybroadandsubjectivedecisionsonaccountingtreatments
Reflecting the aggregated and approximatenature of thesourcedata Fitchappliesa seriesof commonadjustmentsoutlined below Adjustments that are not material to thecreditanalysisdonothavetobemade
A detailed review of Fitchrsquos financial adjustments can be found in appendix 1 of Fitchrsquos criteria report for non-financial corporates httpswwwfitchratingscomresearchcorporate-financecorporate-rating-criteria-01-05-2020
Main Analytical Adjustments
fitchratingscom 11
Adjustments Description
Leases Creatinganequivalenceindebtmetricsforfinancingundertakenusingleasesinselectedsectors
Hybrids Measuringthedegreetowhichanissuancewithhybridfeaturesmayqualifyfortreatingas50of100equityinourleveragemetrics
Pensions Measuringtheimpactofpensionexposuresonourleverageandcashflowanalysis
DebtFactoring Adjustmentstoreflectthesaleofreceivablesinourdebtmetricsandrecoverygivendefaultanalysis
CashAdjustments Adjustmentstoreflectdifferentqualitiesofcashandotherliquidassets
AdjustingConsolidatedProfilesforGroupStructures
Adjustmentstoreflectthedegreeofownershipandcontrolofcashflowsfromvaryinglevelsofownershiporlegaloperationalseparation
HoldCoPIKandShareholderLoans MeasuringthedegreetowhichshareholderloansandPayment-in-Kindnoteswouldbetreatedaspartoftheratedentityrsquosleverageburden
DebtFair-ValueAdjustments Adjustmentstoensuredebtreviewedisthedebtwhichwillbepayableontheinstrumentrsquosmaturityassuminganentityremainsagoingconcern
AdjustmentsforFinancialServicesActivities
Adjustmentstofinancialservices(lsquoFSrsquo)operationswithincorporatestoreflectFitchrsquosassumptionthatdebtallocatedtotheFSoperationsisrepaidusingthecashflowoftheFSoperationsincludingassumptionsforanyimputedadditionalcapitalfortheFSbusinesswhichFitchmayassumetobeaddedtotheindustrialentityrsquosdebtburden
Contact Us
ALL FITCHCREDITRATINGSARESUBJECTTOCERTAINLIMITATIONSANDDISCLAIMERS PLEASEREADTHESELIMITATIONSANDDISCLAIMERSBY FOLLOWINGTHIS LINKHTTPSWWWFITCHRATINGSCOMSITEDEFINITIONS IN ADDITION RATING DEFINITIONS AND THE TERMSOF USEOF SUCH RATINGS ARE AVAILABLEON THE AGENCYrsquoS PUBLICWEB SITE ATWWWFITCHRATINGSCOMPUBLISHEDRATINGSCRITERIAANDMETHODOLOGIESAREAVAILABLEFROMTHISSITEATALLTIMESFITCHrsquoSCODEOFCONDUCTCONFIDENTIALITYCONFLICTSOFINTERESTAFFILIATEFIREWALLCOMPLIANCEANDOTHERRELEVANTPOLICIESANDPROCEDURESAREALSOAVAILABLEFROMTHECODEOFCONDUCTSECTIONOFTHISSITEFITCHMAYHAVEPROVIDEDANOTHERPERMISSIBLESERVICETOTHERATEDENTITYORITSRELATEDTHIRDPARTIESDETAILSOFTHISSERVICEFORRATINGSFORWHICHTHELEADANALYSTISBASEDINANEU-REGISTEREDENTITYCANBEFOUNDONTHEENTITYSUMMARYPAGEFORTHISISSUERONTHEFITCHWEBSITECopyrightcopy2020byFitchRatingsIncFitchRatingsLtdanditssubsidiaries33WhitehallStreetNYNY10004Telephone1-800-753-4824(212)908-0500Fax(212)480-4435ReproductionorretransmissioninwholeorinpartisprohibitedexceptbypermissionAllrightsreservedInissuingandmaintainingitsratingsandinmakingotherreports(includingforecastinformation)FitchreliesonfactualinformationitreceivesfromissuersandunderwritersandfromothersourcesFitchbelievestobecredibleFitchconductsareasonable investigationofthefactual informationrelieduponby it inaccordancewith itsratingsmethodologyandobtainsreasonableverificationofthatinformationfromindependentsourcestotheextentsuchsourcesareavailableforagivensecurityorinagivenjurisdictionThemannerofFitchrsquosfactualinvestigationandthescopeofthethird-partyverificationitobtainswillvarydependingonthenatureoftheratedsecurityanditsissuertherequirementsandpracticesinthejurisdictioninwhichtheratedsecurityisofferedandsoldandortheissuerislocatedtheavailabilityandnatureofrelevantpublicinformationaccesstothemanagementoftheissueranditsadviserstheavailabilityofpre-existingthird-partyverificationssuchasauditreportsagreed-uponprocedureslettersappraisalsactuarialreportsengineeringreportslegalopinionsandotherreportsprovidedbythirdpartiestheavailabilityofindependentandcompetentthird-partyverificationsourceswithrespecttotheparticularsecurityorintheparticularjurisdictionoftheissuerandavarietyofotherfactorsUsersofFitchrsquosratingsandreportsshouldunderstandthatneitheranenhancedfactualinvestigationnoranythird-partyverificationcanensurethatalloftheinformationFitchreliesoninconnectionwitharatingorareportwillbeaccurateandcompleteUltimatelytheissueranditsadvisersareresponsiblefortheaccuracyoftheinformationtheyprovidetoFitchandtothemarketinofferingdocumentsandotherreportsInissuingitsratingsanditsreportsFitchmustrelyontheworkofexpertsincludingindependentauditorswithrespecttofinancialstatementsandattorneyswithrespecttolegalandtaxmattersFurtherratingsandforecastsoffinancialandotherinformationareinherentlyforward-lookingandembodyassumptionsandpredictionsaboutfutureeventsthatbytheirnaturecannotbeverifiedasfactsAsaresultdespiteanyverificationofcurrentfactsratingsandforecastscanbeaffectedbyfutureeventsorconditionsthatwerenotanticipatedatthetimearatingorforecastwasissuedoraffirmedTheinformationinthisreportisprovidedldquoasisrdquowithoutanyrepresentationorwarrantyofanykindandFitchdoesnotrepresentorwarrantthatthereportoranyofitscontentswillmeetanyoftherequirementsofarecipientofthereportAFitchratingisanopinionastothecreditworthinessofasecurityThisopinionandreportsmadebyFitcharebasedonestablishedcriteriaandmethodologiesthatFitchiscontinuouslyevaluatingandupdatingThereforeratingsandreportsarethecollectiveworkproductofFitchandnoindividualorgroupofindividualsissolelyresponsibleforaratingorareportTheratingdoesnotaddresstheriskoflossduetorisksotherthancreditriskunlesssuchriskisspecificallymentionedFitchisnotengagedintheofferorsaleofanysecurityAllFitchreportshavesharedauthorshipIndividualsidentifiedinaFitchreportwereinvolvedinbutarenotsolelyresponsiblefortheopinionsstatedthereinTheindividualsarenamedforcontactpurposesonlyAreportprovidingaFitchratingisneitheraprospectusnorasubstitutefortheinformationassembledverifiedandpresentedtoinvestorsbytheissueranditsagentsinconnectionwiththesaleofthesecuritiesRatingsmaybechangedorwithdrawnatanytimeforanyreasoninthesolediscretionofFitchFitchdoesnotprovideinvestmentadviceofanysortRatingsarenotarecommendationtobuysellorholdanysecurityRatingsdonotcommentontheadequacyofmarketpricethesuitabilityofanysecurityforaparticularinvestororthetax-exemptnatureortaxabilityofpaymentsmadeinrespecttoanysecurityFitchreceivesfeesfromissuersinsurersguarantorsotherobligorsandunderwritersforratingsecuritiesSuchfeesgenerallyvaryfromUS$1000toUS$750000(ortheapplicablecurrencyequivalent)perissueIncertaincasesFitchwillratealloranumberofissuesissuedbyaparticularissuerorinsuredorguaranteedbyaparticularinsurerorguarantorforasingleannualfeeSuchfeesareexpectedtovaryfromUS$10000toUS$1500000(ortheapplicablecurrencyequivalent)TheassignmentpublicationordisseminationofaratingbyFitchshallnotconstituteaconsentbyFitchtouseitsnameasanexpertinconnectionwithanyregistrationstatementfiledundertheUnitedStatessecuritieslawstheFinancialServicesandMarketsActof2000oftheUnitedKingdomorthesecuritieslawsofanyparticularjurisdictionDuetotherelativeefficiencyofelectronicpublishinganddistributionFitchresearchmaybeavailabletoelectronicsubscribersuptothreedaysearlierthantoprintsubscribersForAustraliaNewZealandTaiwanandSouthKoreaonlyFitchAustraliaPtyLtdholdsanAustralianfinancialserviceslicense(AFSlicenseno337123)whichauthorizesittoprovidecreditratingstowholesaleclientsonlyCreditratingsinformationpublishedbyFitchisnotintendedtobeusedbypersonswhoareretailclientswithinthemeaningoftheCorporationsAct2001DC-177
Scott CassieSeniorDirectorHead-NorthAmericanCorporatesIssuerBusinessRelationshipManagementFitchRatings300West57StNewYorkNY10019scottcassiefitchratingscom Tom Muoio ManagingDirectorCorporatesandStructuredCreditBusinessRelationshipManagementFitch Ratings 30 North Colonnade Canary Wharf LondonE145GNUKtommuoiofitchratingscom
Kathleen Fuentes HoltzmanManagingDirectorLatinAmericaFitchRatings300West57thStreetNewYorkNYkathleenholtzmanfitchratingscom
Ng Sing Chan ManagingDirectorHeadofAPACBusinessOriginationFitchRatings1RafflesQuaySingapore048583singchanngfitchratingscom
fitchratingscom 6
Financial Terms and RatiosMain Terms
Fitch-defined term Definition
OperatingEBIT GrossProfit-SGampAorOampMExpense-RampDExpense-ProvisionforBadDebts-DepreciationofTangibleassets -Amortisationof IntangibleAssets - -DepreciationofLeasedAssetsndash InterestChargeonLeaseLiabilities - OtherDepreciationandAmortizationexcludedfromSGampAndash Impairments included inEBITDA -Pre-OpeningampExplorationExpense -RegulatoryFees+OtherOperatingIncome(Expenses)-SecuritisationAmortisation
OperatingEBITDA Operating EBIT + adjustment for Non-RecurringNon-Recourse items +non-leasedepreciationampamortisation+analystadjustmentstoEBITDA
OperatingEBITDAR OperatingEBITDA+estimatedOperatingLeaseExpense
CashFlowFromOperations(CFO) NetIncome+TotalAdjustmentstoNetIncome+ChangeinWorkingCapital+RecurringCash Dividends Received from AssociatesEquity Method Investments + Investing ampFinancingCashFlowdeemedasOperating-DividendsPaidtoPreferredShareholders-DistributionstoNon-ControllingInterests
Fitchdefinedworkingcapital ChangeinReceivables+Changeintradepayables+ChangeinAccruedExpenses+anyotherchangesinwcap
FundsFromOperation(FFO) CashFlowFromOperations(CFO)-ChangeinFitch-definedWorkingCapital
FreeCashFlow(FCF) Cash Flow from Operations - Capital Expenditures - Common Dividends + Total Non-OperatingampNon-RecurringCashFlowbeforebusinessacquisitionbusinessdivestmentsandsharebuybackspecialdividends
Totaldebt TotalSecuredDebt+TotalUnsecuredDebt+TotalSubordinatedDebt+PreferredStock+Short-termnon-recourseDebt+Long-ternnon-recourseDebt+SecuritisationDebt+NetDerivative(assets)liabilitiesHedgingPrincipalBorrowings
Totaldebtwithequitycredit TotalDebt-EquityCredit
Totaladjusteddebtwithequitycredit TotalDebtwithEquityCredit+LeaseequivalentDebt+OtheroffBalanceSheetDebt
Readilyavailablecashampequivalents Cash+MarketableSecurities -Cash reportedasRestrictedorBlocked -CashdeemedbyFitchasnot readilyavailable (includingadjustments forminimumcash required forongoingoperationssuchasseasonalityWorkingCapitalfluctuationsandCashHeldbynotWhollyOwnedorNon-RecourseSubsidiariesorinOffshoreHoldings)
Netadjusteddebtwithequitycredit TotalAdjustedDebtwithEquityCredit-ReadilyAvailableCashampEquivalents
Interestpaidreceived CashinterestisusedincoverageratiosbutifInterestPaidorInterestReceivedequalzerothenInterestExpenseandInterestIncomeasperthePampLisusedinstead
SourceFitchRatings
fitchratingscom 7
Main Ratios
Ratio Numerator Denominator
Profitabilitycash flow ratios
EBITmargin OperatingEBIT Revenues
EBITmargin-Group OperatingEBITincludingfinancialservicesoperations
Consolidatedrevenues
EBITmargin-Industrial OperatingEBITexcludingfinancialservicesoperations
Industrialoperationrevenues
OperatingEBITDARmargin OperatingEBITDAR Revenues
FFOmargin FFO Revenues
FCFmargin FreeCashFlow Revenues
CapexCFO CapitalExpenditure CashFlowfromOperations
CFOmargin CashFlowFromOperations Revenues
Leverage ratios
TotaladjusteddebtopEBITDAR(x)
TotalAdjustedDebtwithEquityCredit
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
TotaladjustednetdebtopEBITDAR(x)
NetAdjustedDebtwithEquityCredit OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
FFOadjustedleverage(x) TotalAdjustedDebtwithEquityCredit
FundsFromOperations[FFO]+InterestPaid-InterestReceived+PreferredDividends(Paid)+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOadjustednetleverage(x) NetAdjustedDebtwithEquityCredit FundsFromOperations[FFO]+InterestPaid-InterestReceived+PreferredDividends(Paid)+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOleverage(x) TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt
FundsFromOperations[FFO]+InterestPaidndashInterestReceived+PreferredDividends(Paid)
FFOnetleverage(x) TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebtndashReadilyAvailableCashampEquivalents
FundsFromOperations[FFO]+InterestPaidndashInterestReceived+PreferredDividends(Paid)
(CFOndashCapEx)TotalDebtwithEquityCredit()
CashFlowfromOperations[CFO]ndashCapital(Expenditures)
TotalAdjustedDebtwithEquityCredit-LeaseEquivalentDebt
(CFOndashCapEx)TotalNetDebtwithEquityCredit()
CashFlowfromOperations[CFO]ndashCapital(Expenditures)
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebtndashReadilyAvailableCashampEquivalents
FCFtotaladjusteddebt() FreeCashFlow TotalAdjustedDebtwithEquityCredit
SourceFitchRatings
fitchratingscom 8
Main Ratios (Cont)
Ratio Numerator Denominator
TotaldebtwithequitycreditopEBITDA(x)
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt
OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
TotalnetdebtwithequitycreditoperatingEBITDA
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt-ReadilyAvailableCashampEquivalents
OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
Totaladjdebt(CFObeforeleaseexpense-MaintCapEx)(x)
TotalAdjustedDebtwithEquityCredit CashFlowFromOperations[CFO]+OperatingLeaseExpenseforCapitalisedLeasedAssets-MaintenanceCapex(totalcapexusedifmaintenancecapexunavailable)
Coverage ratios
FFOfixed-chargecoverage(x) FFO+Interestpaid-interestreceived+PreferredDividendspaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
InterestPaid+PreferredDividendsPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOinterestcoverage(x) FFO+Interestpaidminusinterestreceived+PreferredDividendspaid
InterestPaid+PreferredDividendsPaid
OperatingEBITDARgrossinterestpaid+rents(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
OperatingEBITDARnetinterestpaid+rents(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid-InterestReceived+OperatingLeaseExpenseforCapitalisedLeasedAssets
OpEBITDAinterestpaid(x) OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid
SourceFitchRatings
fitchratingscom 9
Main Ratios (Cont)
Ratio Numerator Denominator
OpEBITDAR(interestpaid+leaseexpense)(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
CFOcapitalexpenditures(x) CashFlowfromOperations[CFO] Capital(Expenditures)
CapexCFO() Capital(Expenditures) CashFlowfromOperations[CFO]
Liquidity ratios
FFOdebtservicecover FFO+Interestpaidminusinterestreceived+PreferredDividends+OperatingLeaseExpenseforCapitalisedLeasedAssets
InterestPaid+PreferredDividends+CurrentDebtMaturities
Liquidity(liquidityratio) Availablecash+undrawnportionofcommittedfacilities+FCF
12-monthdebtMaturities
SourceFitchRatings
fitchratingscom 10
Fitch encourages an analytical climate where financialstatements are regarded as a source material providingbroad indications of the financial position rather than as acomprehensive registerof immutable factsThe limitationsofthesourcematerialndashcorporategroupfinancialstatementsndasharemanyandvaried
Forexampleitisnotunusualformajorgroupstobecomposedof hundreds of legal entities Financial statements presenta high-level consolidated picture but material differenceswillexistintheprecisefinancialpositionndashincomeexpenseobligations and cash-generating ability ndash of different legalentitieswithinaconsolidated group whichmay besweptupandmaskedbytheprocessofaccountingconsolidation
Similarly theapparentlysmoothandorderlysequentialflowof thepublishedincomeandcashflowdoes notreflectanactuallinearflowofpaymentsthroughacompanyrsquoshandsoralegalwaterfallofprioritiesbutratheraggregatesatheoreticalflowInpracticethecompanydoesnotwriteachequeforits
entireannualoperatingexpenditurefollowedthenextmonthby one amount for its annual interest bill followed by oneinstalmentforitstaxbillfollowedonlythenbyonepaymentforitsannualcapitalexpenditurebillandsoon
Furthermorefinancialstatementspresentonlyasnapshotofassetsandliabilitiesandaresubjecttooftenverybroadandsubjectivedecisionsonaccountingtreatments
Reflecting the aggregated and approximatenature of thesourcedata Fitchappliesa seriesof commonadjustmentsoutlined below Adjustments that are not material to thecreditanalysisdonothavetobemade
A detailed review of Fitchrsquos financial adjustments can be found in appendix 1 of Fitchrsquos criteria report for non-financial corporates httpswwwfitchratingscomresearchcorporate-financecorporate-rating-criteria-01-05-2020
Main Analytical Adjustments
fitchratingscom 11
Adjustments Description
Leases Creatinganequivalenceindebtmetricsforfinancingundertakenusingleasesinselectedsectors
Hybrids Measuringthedegreetowhichanissuancewithhybridfeaturesmayqualifyfortreatingas50of100equityinourleveragemetrics
Pensions Measuringtheimpactofpensionexposuresonourleverageandcashflowanalysis
DebtFactoring Adjustmentstoreflectthesaleofreceivablesinourdebtmetricsandrecoverygivendefaultanalysis
CashAdjustments Adjustmentstoreflectdifferentqualitiesofcashandotherliquidassets
AdjustingConsolidatedProfilesforGroupStructures
Adjustmentstoreflectthedegreeofownershipandcontrolofcashflowsfromvaryinglevelsofownershiporlegaloperationalseparation
HoldCoPIKandShareholderLoans MeasuringthedegreetowhichshareholderloansandPayment-in-Kindnoteswouldbetreatedaspartoftheratedentityrsquosleverageburden
DebtFair-ValueAdjustments Adjustmentstoensuredebtreviewedisthedebtwhichwillbepayableontheinstrumentrsquosmaturityassuminganentityremainsagoingconcern
AdjustmentsforFinancialServicesActivities
Adjustmentstofinancialservices(lsquoFSrsquo)operationswithincorporatestoreflectFitchrsquosassumptionthatdebtallocatedtotheFSoperationsisrepaidusingthecashflowoftheFSoperationsincludingassumptionsforanyimputedadditionalcapitalfortheFSbusinesswhichFitchmayassumetobeaddedtotheindustrialentityrsquosdebtburden
Contact Us
ALL FITCHCREDITRATINGSARESUBJECTTOCERTAINLIMITATIONSANDDISCLAIMERS PLEASEREADTHESELIMITATIONSANDDISCLAIMERSBY FOLLOWINGTHIS LINKHTTPSWWWFITCHRATINGSCOMSITEDEFINITIONS IN ADDITION RATING DEFINITIONS AND THE TERMSOF USEOF SUCH RATINGS ARE AVAILABLEON THE AGENCYrsquoS PUBLICWEB SITE ATWWWFITCHRATINGSCOMPUBLISHEDRATINGSCRITERIAANDMETHODOLOGIESAREAVAILABLEFROMTHISSITEATALLTIMESFITCHrsquoSCODEOFCONDUCTCONFIDENTIALITYCONFLICTSOFINTERESTAFFILIATEFIREWALLCOMPLIANCEANDOTHERRELEVANTPOLICIESANDPROCEDURESAREALSOAVAILABLEFROMTHECODEOFCONDUCTSECTIONOFTHISSITEFITCHMAYHAVEPROVIDEDANOTHERPERMISSIBLESERVICETOTHERATEDENTITYORITSRELATEDTHIRDPARTIESDETAILSOFTHISSERVICEFORRATINGSFORWHICHTHELEADANALYSTISBASEDINANEU-REGISTEREDENTITYCANBEFOUNDONTHEENTITYSUMMARYPAGEFORTHISISSUERONTHEFITCHWEBSITECopyrightcopy2020byFitchRatingsIncFitchRatingsLtdanditssubsidiaries33WhitehallStreetNYNY10004Telephone1-800-753-4824(212)908-0500Fax(212)480-4435ReproductionorretransmissioninwholeorinpartisprohibitedexceptbypermissionAllrightsreservedInissuingandmaintainingitsratingsandinmakingotherreports(includingforecastinformation)FitchreliesonfactualinformationitreceivesfromissuersandunderwritersandfromothersourcesFitchbelievestobecredibleFitchconductsareasonable investigationofthefactual informationrelieduponby it inaccordancewith itsratingsmethodologyandobtainsreasonableverificationofthatinformationfromindependentsourcestotheextentsuchsourcesareavailableforagivensecurityorinagivenjurisdictionThemannerofFitchrsquosfactualinvestigationandthescopeofthethird-partyverificationitobtainswillvarydependingonthenatureoftheratedsecurityanditsissuertherequirementsandpracticesinthejurisdictioninwhichtheratedsecurityisofferedandsoldandortheissuerislocatedtheavailabilityandnatureofrelevantpublicinformationaccesstothemanagementoftheissueranditsadviserstheavailabilityofpre-existingthird-partyverificationssuchasauditreportsagreed-uponprocedureslettersappraisalsactuarialreportsengineeringreportslegalopinionsandotherreportsprovidedbythirdpartiestheavailabilityofindependentandcompetentthird-partyverificationsourceswithrespecttotheparticularsecurityorintheparticularjurisdictionoftheissuerandavarietyofotherfactorsUsersofFitchrsquosratingsandreportsshouldunderstandthatneitheranenhancedfactualinvestigationnoranythird-partyverificationcanensurethatalloftheinformationFitchreliesoninconnectionwitharatingorareportwillbeaccurateandcompleteUltimatelytheissueranditsadvisersareresponsiblefortheaccuracyoftheinformationtheyprovidetoFitchandtothemarketinofferingdocumentsandotherreportsInissuingitsratingsanditsreportsFitchmustrelyontheworkofexpertsincludingindependentauditorswithrespecttofinancialstatementsandattorneyswithrespecttolegalandtaxmattersFurtherratingsandforecastsoffinancialandotherinformationareinherentlyforward-lookingandembodyassumptionsandpredictionsaboutfutureeventsthatbytheirnaturecannotbeverifiedasfactsAsaresultdespiteanyverificationofcurrentfactsratingsandforecastscanbeaffectedbyfutureeventsorconditionsthatwerenotanticipatedatthetimearatingorforecastwasissuedoraffirmedTheinformationinthisreportisprovidedldquoasisrdquowithoutanyrepresentationorwarrantyofanykindandFitchdoesnotrepresentorwarrantthatthereportoranyofitscontentswillmeetanyoftherequirementsofarecipientofthereportAFitchratingisanopinionastothecreditworthinessofasecurityThisopinionandreportsmadebyFitcharebasedonestablishedcriteriaandmethodologiesthatFitchiscontinuouslyevaluatingandupdatingThereforeratingsandreportsarethecollectiveworkproductofFitchandnoindividualorgroupofindividualsissolelyresponsibleforaratingorareportTheratingdoesnotaddresstheriskoflossduetorisksotherthancreditriskunlesssuchriskisspecificallymentionedFitchisnotengagedintheofferorsaleofanysecurityAllFitchreportshavesharedauthorshipIndividualsidentifiedinaFitchreportwereinvolvedinbutarenotsolelyresponsiblefortheopinionsstatedthereinTheindividualsarenamedforcontactpurposesonlyAreportprovidingaFitchratingisneitheraprospectusnorasubstitutefortheinformationassembledverifiedandpresentedtoinvestorsbytheissueranditsagentsinconnectionwiththesaleofthesecuritiesRatingsmaybechangedorwithdrawnatanytimeforanyreasoninthesolediscretionofFitchFitchdoesnotprovideinvestmentadviceofanysortRatingsarenotarecommendationtobuysellorholdanysecurityRatingsdonotcommentontheadequacyofmarketpricethesuitabilityofanysecurityforaparticularinvestororthetax-exemptnatureortaxabilityofpaymentsmadeinrespecttoanysecurityFitchreceivesfeesfromissuersinsurersguarantorsotherobligorsandunderwritersforratingsecuritiesSuchfeesgenerallyvaryfromUS$1000toUS$750000(ortheapplicablecurrencyequivalent)perissueIncertaincasesFitchwillratealloranumberofissuesissuedbyaparticularissuerorinsuredorguaranteedbyaparticularinsurerorguarantorforasingleannualfeeSuchfeesareexpectedtovaryfromUS$10000toUS$1500000(ortheapplicablecurrencyequivalent)TheassignmentpublicationordisseminationofaratingbyFitchshallnotconstituteaconsentbyFitchtouseitsnameasanexpertinconnectionwithanyregistrationstatementfiledundertheUnitedStatessecuritieslawstheFinancialServicesandMarketsActof2000oftheUnitedKingdomorthesecuritieslawsofanyparticularjurisdictionDuetotherelativeefficiencyofelectronicpublishinganddistributionFitchresearchmaybeavailabletoelectronicsubscribersuptothreedaysearlierthantoprintsubscribersForAustraliaNewZealandTaiwanandSouthKoreaonlyFitchAustraliaPtyLtdholdsanAustralianfinancialserviceslicense(AFSlicenseno337123)whichauthorizesittoprovidecreditratingstowholesaleclientsonlyCreditratingsinformationpublishedbyFitchisnotintendedtobeusedbypersonswhoareretailclientswithinthemeaningoftheCorporationsAct2001DC-177
Scott CassieSeniorDirectorHead-NorthAmericanCorporatesIssuerBusinessRelationshipManagementFitchRatings300West57StNewYorkNY10019scottcassiefitchratingscom Tom Muoio ManagingDirectorCorporatesandStructuredCreditBusinessRelationshipManagementFitch Ratings 30 North Colonnade Canary Wharf LondonE145GNUKtommuoiofitchratingscom
Kathleen Fuentes HoltzmanManagingDirectorLatinAmericaFitchRatings300West57thStreetNewYorkNYkathleenholtzmanfitchratingscom
Ng Sing Chan ManagingDirectorHeadofAPACBusinessOriginationFitchRatings1RafflesQuaySingapore048583singchanngfitchratingscom
fitchratingscom 7
Main Ratios
Ratio Numerator Denominator
Profitabilitycash flow ratios
EBITmargin OperatingEBIT Revenues
EBITmargin-Group OperatingEBITincludingfinancialservicesoperations
Consolidatedrevenues
EBITmargin-Industrial OperatingEBITexcludingfinancialservicesoperations
Industrialoperationrevenues
OperatingEBITDARmargin OperatingEBITDAR Revenues
FFOmargin FFO Revenues
FCFmargin FreeCashFlow Revenues
CapexCFO CapitalExpenditure CashFlowfromOperations
CFOmargin CashFlowFromOperations Revenues
Leverage ratios
TotaladjusteddebtopEBITDAR(x)
TotalAdjustedDebtwithEquityCredit
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
TotaladjustednetdebtopEBITDAR(x)
NetAdjustedDebtwithEquityCredit OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
FFOadjustedleverage(x) TotalAdjustedDebtwithEquityCredit
FundsFromOperations[FFO]+InterestPaid-InterestReceived+PreferredDividends(Paid)+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOadjustednetleverage(x) NetAdjustedDebtwithEquityCredit FundsFromOperations[FFO]+InterestPaid-InterestReceived+PreferredDividends(Paid)+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOleverage(x) TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt
FundsFromOperations[FFO]+InterestPaidndashInterestReceived+PreferredDividends(Paid)
FFOnetleverage(x) TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebtndashReadilyAvailableCashampEquivalents
FundsFromOperations[FFO]+InterestPaidndashInterestReceived+PreferredDividends(Paid)
(CFOndashCapEx)TotalDebtwithEquityCredit()
CashFlowfromOperations[CFO]ndashCapital(Expenditures)
TotalAdjustedDebtwithEquityCredit-LeaseEquivalentDebt
(CFOndashCapEx)TotalNetDebtwithEquityCredit()
CashFlowfromOperations[CFO]ndashCapital(Expenditures)
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebtndashReadilyAvailableCashampEquivalents
FCFtotaladjusteddebt() FreeCashFlow TotalAdjustedDebtwithEquityCredit
SourceFitchRatings
fitchratingscom 8
Main Ratios (Cont)
Ratio Numerator Denominator
TotaldebtwithequitycreditopEBITDA(x)
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt
OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
TotalnetdebtwithequitycreditoperatingEBITDA
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt-ReadilyAvailableCashampEquivalents
OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
Totaladjdebt(CFObeforeleaseexpense-MaintCapEx)(x)
TotalAdjustedDebtwithEquityCredit CashFlowFromOperations[CFO]+OperatingLeaseExpenseforCapitalisedLeasedAssets-MaintenanceCapex(totalcapexusedifmaintenancecapexunavailable)
Coverage ratios
FFOfixed-chargecoverage(x) FFO+Interestpaid-interestreceived+PreferredDividendspaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
InterestPaid+PreferredDividendsPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOinterestcoverage(x) FFO+Interestpaidminusinterestreceived+PreferredDividendspaid
InterestPaid+PreferredDividendsPaid
OperatingEBITDARgrossinterestpaid+rents(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
OperatingEBITDARnetinterestpaid+rents(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid-InterestReceived+OperatingLeaseExpenseforCapitalisedLeasedAssets
OpEBITDAinterestpaid(x) OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid
SourceFitchRatings
fitchratingscom 9
Main Ratios (Cont)
Ratio Numerator Denominator
OpEBITDAR(interestpaid+leaseexpense)(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
CFOcapitalexpenditures(x) CashFlowfromOperations[CFO] Capital(Expenditures)
CapexCFO() Capital(Expenditures) CashFlowfromOperations[CFO]
Liquidity ratios
FFOdebtservicecover FFO+Interestpaidminusinterestreceived+PreferredDividends+OperatingLeaseExpenseforCapitalisedLeasedAssets
InterestPaid+PreferredDividends+CurrentDebtMaturities
Liquidity(liquidityratio) Availablecash+undrawnportionofcommittedfacilities+FCF
12-monthdebtMaturities
SourceFitchRatings
fitchratingscom 10
Fitch encourages an analytical climate where financialstatements are regarded as a source material providingbroad indications of the financial position rather than as acomprehensive registerof immutable factsThe limitationsofthesourcematerialndashcorporategroupfinancialstatementsndasharemanyandvaried
Forexampleitisnotunusualformajorgroupstobecomposedof hundreds of legal entities Financial statements presenta high-level consolidated picture but material differenceswillexistintheprecisefinancialpositionndashincomeexpenseobligations and cash-generating ability ndash of different legalentitieswithinaconsolidated group whichmay besweptupandmaskedbytheprocessofaccountingconsolidation
Similarly theapparentlysmoothandorderlysequentialflowof thepublishedincomeandcashflowdoes notreflectanactuallinearflowofpaymentsthroughacompanyrsquoshandsoralegalwaterfallofprioritiesbutratheraggregatesatheoreticalflowInpracticethecompanydoesnotwriteachequeforits
entireannualoperatingexpenditurefollowedthenextmonthby one amount for its annual interest bill followed by oneinstalmentforitstaxbillfollowedonlythenbyonepaymentforitsannualcapitalexpenditurebillandsoon
Furthermorefinancialstatementspresentonlyasnapshotofassetsandliabilitiesandaresubjecttooftenverybroadandsubjectivedecisionsonaccountingtreatments
Reflecting the aggregated and approximatenature of thesourcedata Fitchappliesa seriesof commonadjustmentsoutlined below Adjustments that are not material to thecreditanalysisdonothavetobemade
A detailed review of Fitchrsquos financial adjustments can be found in appendix 1 of Fitchrsquos criteria report for non-financial corporates httpswwwfitchratingscomresearchcorporate-financecorporate-rating-criteria-01-05-2020
Main Analytical Adjustments
fitchratingscom 11
Adjustments Description
Leases Creatinganequivalenceindebtmetricsforfinancingundertakenusingleasesinselectedsectors
Hybrids Measuringthedegreetowhichanissuancewithhybridfeaturesmayqualifyfortreatingas50of100equityinourleveragemetrics
Pensions Measuringtheimpactofpensionexposuresonourleverageandcashflowanalysis
DebtFactoring Adjustmentstoreflectthesaleofreceivablesinourdebtmetricsandrecoverygivendefaultanalysis
CashAdjustments Adjustmentstoreflectdifferentqualitiesofcashandotherliquidassets
AdjustingConsolidatedProfilesforGroupStructures
Adjustmentstoreflectthedegreeofownershipandcontrolofcashflowsfromvaryinglevelsofownershiporlegaloperationalseparation
HoldCoPIKandShareholderLoans MeasuringthedegreetowhichshareholderloansandPayment-in-Kindnoteswouldbetreatedaspartoftheratedentityrsquosleverageburden
DebtFair-ValueAdjustments Adjustmentstoensuredebtreviewedisthedebtwhichwillbepayableontheinstrumentrsquosmaturityassuminganentityremainsagoingconcern
AdjustmentsforFinancialServicesActivities
Adjustmentstofinancialservices(lsquoFSrsquo)operationswithincorporatestoreflectFitchrsquosassumptionthatdebtallocatedtotheFSoperationsisrepaidusingthecashflowoftheFSoperationsincludingassumptionsforanyimputedadditionalcapitalfortheFSbusinesswhichFitchmayassumetobeaddedtotheindustrialentityrsquosdebtburden
Contact Us
ALL FITCHCREDITRATINGSARESUBJECTTOCERTAINLIMITATIONSANDDISCLAIMERS PLEASEREADTHESELIMITATIONSANDDISCLAIMERSBY FOLLOWINGTHIS LINKHTTPSWWWFITCHRATINGSCOMSITEDEFINITIONS IN ADDITION RATING DEFINITIONS AND THE TERMSOF USEOF SUCH RATINGS ARE AVAILABLEON THE AGENCYrsquoS PUBLICWEB SITE ATWWWFITCHRATINGSCOMPUBLISHEDRATINGSCRITERIAANDMETHODOLOGIESAREAVAILABLEFROMTHISSITEATALLTIMESFITCHrsquoSCODEOFCONDUCTCONFIDENTIALITYCONFLICTSOFINTERESTAFFILIATEFIREWALLCOMPLIANCEANDOTHERRELEVANTPOLICIESANDPROCEDURESAREALSOAVAILABLEFROMTHECODEOFCONDUCTSECTIONOFTHISSITEFITCHMAYHAVEPROVIDEDANOTHERPERMISSIBLESERVICETOTHERATEDENTITYORITSRELATEDTHIRDPARTIESDETAILSOFTHISSERVICEFORRATINGSFORWHICHTHELEADANALYSTISBASEDINANEU-REGISTEREDENTITYCANBEFOUNDONTHEENTITYSUMMARYPAGEFORTHISISSUERONTHEFITCHWEBSITECopyrightcopy2020byFitchRatingsIncFitchRatingsLtdanditssubsidiaries33WhitehallStreetNYNY10004Telephone1-800-753-4824(212)908-0500Fax(212)480-4435ReproductionorretransmissioninwholeorinpartisprohibitedexceptbypermissionAllrightsreservedInissuingandmaintainingitsratingsandinmakingotherreports(includingforecastinformation)FitchreliesonfactualinformationitreceivesfromissuersandunderwritersandfromothersourcesFitchbelievestobecredibleFitchconductsareasonable investigationofthefactual informationrelieduponby it inaccordancewith itsratingsmethodologyandobtainsreasonableverificationofthatinformationfromindependentsourcestotheextentsuchsourcesareavailableforagivensecurityorinagivenjurisdictionThemannerofFitchrsquosfactualinvestigationandthescopeofthethird-partyverificationitobtainswillvarydependingonthenatureoftheratedsecurityanditsissuertherequirementsandpracticesinthejurisdictioninwhichtheratedsecurityisofferedandsoldandortheissuerislocatedtheavailabilityandnatureofrelevantpublicinformationaccesstothemanagementoftheissueranditsadviserstheavailabilityofpre-existingthird-partyverificationssuchasauditreportsagreed-uponprocedureslettersappraisalsactuarialreportsengineeringreportslegalopinionsandotherreportsprovidedbythirdpartiestheavailabilityofindependentandcompetentthird-partyverificationsourceswithrespecttotheparticularsecurityorintheparticularjurisdictionoftheissuerandavarietyofotherfactorsUsersofFitchrsquosratingsandreportsshouldunderstandthatneitheranenhancedfactualinvestigationnoranythird-partyverificationcanensurethatalloftheinformationFitchreliesoninconnectionwitharatingorareportwillbeaccurateandcompleteUltimatelytheissueranditsadvisersareresponsiblefortheaccuracyoftheinformationtheyprovidetoFitchandtothemarketinofferingdocumentsandotherreportsInissuingitsratingsanditsreportsFitchmustrelyontheworkofexpertsincludingindependentauditorswithrespecttofinancialstatementsandattorneyswithrespecttolegalandtaxmattersFurtherratingsandforecastsoffinancialandotherinformationareinherentlyforward-lookingandembodyassumptionsandpredictionsaboutfutureeventsthatbytheirnaturecannotbeverifiedasfactsAsaresultdespiteanyverificationofcurrentfactsratingsandforecastscanbeaffectedbyfutureeventsorconditionsthatwerenotanticipatedatthetimearatingorforecastwasissuedoraffirmedTheinformationinthisreportisprovidedldquoasisrdquowithoutanyrepresentationorwarrantyofanykindandFitchdoesnotrepresentorwarrantthatthereportoranyofitscontentswillmeetanyoftherequirementsofarecipientofthereportAFitchratingisanopinionastothecreditworthinessofasecurityThisopinionandreportsmadebyFitcharebasedonestablishedcriteriaandmethodologiesthatFitchiscontinuouslyevaluatingandupdatingThereforeratingsandreportsarethecollectiveworkproductofFitchandnoindividualorgroupofindividualsissolelyresponsibleforaratingorareportTheratingdoesnotaddresstheriskoflossduetorisksotherthancreditriskunlesssuchriskisspecificallymentionedFitchisnotengagedintheofferorsaleofanysecurityAllFitchreportshavesharedauthorshipIndividualsidentifiedinaFitchreportwereinvolvedinbutarenotsolelyresponsiblefortheopinionsstatedthereinTheindividualsarenamedforcontactpurposesonlyAreportprovidingaFitchratingisneitheraprospectusnorasubstitutefortheinformationassembledverifiedandpresentedtoinvestorsbytheissueranditsagentsinconnectionwiththesaleofthesecuritiesRatingsmaybechangedorwithdrawnatanytimeforanyreasoninthesolediscretionofFitchFitchdoesnotprovideinvestmentadviceofanysortRatingsarenotarecommendationtobuysellorholdanysecurityRatingsdonotcommentontheadequacyofmarketpricethesuitabilityofanysecurityforaparticularinvestororthetax-exemptnatureortaxabilityofpaymentsmadeinrespecttoanysecurityFitchreceivesfeesfromissuersinsurersguarantorsotherobligorsandunderwritersforratingsecuritiesSuchfeesgenerallyvaryfromUS$1000toUS$750000(ortheapplicablecurrencyequivalent)perissueIncertaincasesFitchwillratealloranumberofissuesissuedbyaparticularissuerorinsuredorguaranteedbyaparticularinsurerorguarantorforasingleannualfeeSuchfeesareexpectedtovaryfromUS$10000toUS$1500000(ortheapplicablecurrencyequivalent)TheassignmentpublicationordisseminationofaratingbyFitchshallnotconstituteaconsentbyFitchtouseitsnameasanexpertinconnectionwithanyregistrationstatementfiledundertheUnitedStatessecuritieslawstheFinancialServicesandMarketsActof2000oftheUnitedKingdomorthesecuritieslawsofanyparticularjurisdictionDuetotherelativeefficiencyofelectronicpublishinganddistributionFitchresearchmaybeavailabletoelectronicsubscribersuptothreedaysearlierthantoprintsubscribersForAustraliaNewZealandTaiwanandSouthKoreaonlyFitchAustraliaPtyLtdholdsanAustralianfinancialserviceslicense(AFSlicenseno337123)whichauthorizesittoprovidecreditratingstowholesaleclientsonlyCreditratingsinformationpublishedbyFitchisnotintendedtobeusedbypersonswhoareretailclientswithinthemeaningoftheCorporationsAct2001DC-177
Scott CassieSeniorDirectorHead-NorthAmericanCorporatesIssuerBusinessRelationshipManagementFitchRatings300West57StNewYorkNY10019scottcassiefitchratingscom Tom Muoio ManagingDirectorCorporatesandStructuredCreditBusinessRelationshipManagementFitch Ratings 30 North Colonnade Canary Wharf LondonE145GNUKtommuoiofitchratingscom
Kathleen Fuentes HoltzmanManagingDirectorLatinAmericaFitchRatings300West57thStreetNewYorkNYkathleenholtzmanfitchratingscom
Ng Sing Chan ManagingDirectorHeadofAPACBusinessOriginationFitchRatings1RafflesQuaySingapore048583singchanngfitchratingscom
fitchratingscom 8
Main Ratios (Cont)
Ratio Numerator Denominator
TotaldebtwithequitycreditopEBITDA(x)
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt
OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
TotalnetdebtwithequitycreditoperatingEBITDA
TotalAdjustedDebtwithEquityCreditndashLeaseEquivalentDebt-ReadilyAvailableCashampEquivalents
OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
Totaladjdebt(CFObeforeleaseexpense-MaintCapEx)(x)
TotalAdjustedDebtwithEquityCredit CashFlowFromOperations[CFO]+OperatingLeaseExpenseforCapitalisedLeasedAssets-MaintenanceCapex(totalcapexusedifmaintenancecapexunavailable)
Coverage ratios
FFOfixed-chargecoverage(x) FFO+Interestpaid-interestreceived+PreferredDividendspaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
InterestPaid+PreferredDividendsPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
FFOinterestcoverage(x) FFO+Interestpaidminusinterestreceived+PreferredDividendspaid
InterestPaid+PreferredDividendsPaid
OperatingEBITDARgrossinterestpaid+rents(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
OperatingEBITDARnetinterestpaid+rents(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid-InterestReceived+OperatingLeaseExpenseforCapitalisedLeasedAssets
OpEBITDAinterestpaid(x) OperatingEBITDA+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid
SourceFitchRatings
fitchratingscom 9
Main Ratios (Cont)
Ratio Numerator Denominator
OpEBITDAR(interestpaid+leaseexpense)(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
CFOcapitalexpenditures(x) CashFlowfromOperations[CFO] Capital(Expenditures)
CapexCFO() Capital(Expenditures) CashFlowfromOperations[CFO]
Liquidity ratios
FFOdebtservicecover FFO+Interestpaidminusinterestreceived+PreferredDividends+OperatingLeaseExpenseforCapitalisedLeasedAssets
InterestPaid+PreferredDividends+CurrentDebtMaturities
Liquidity(liquidityratio) Availablecash+undrawnportionofcommittedfacilities+FCF
12-monthdebtMaturities
SourceFitchRatings
fitchratingscom 10
Fitch encourages an analytical climate where financialstatements are regarded as a source material providingbroad indications of the financial position rather than as acomprehensive registerof immutable factsThe limitationsofthesourcematerialndashcorporategroupfinancialstatementsndasharemanyandvaried
Forexampleitisnotunusualformajorgroupstobecomposedof hundreds of legal entities Financial statements presenta high-level consolidated picture but material differenceswillexistintheprecisefinancialpositionndashincomeexpenseobligations and cash-generating ability ndash of different legalentitieswithinaconsolidated group whichmay besweptupandmaskedbytheprocessofaccountingconsolidation
Similarly theapparentlysmoothandorderlysequentialflowof thepublishedincomeandcashflowdoes notreflectanactuallinearflowofpaymentsthroughacompanyrsquoshandsoralegalwaterfallofprioritiesbutratheraggregatesatheoreticalflowInpracticethecompanydoesnotwriteachequeforits
entireannualoperatingexpenditurefollowedthenextmonthby one amount for its annual interest bill followed by oneinstalmentforitstaxbillfollowedonlythenbyonepaymentforitsannualcapitalexpenditurebillandsoon
Furthermorefinancialstatementspresentonlyasnapshotofassetsandliabilitiesandaresubjecttooftenverybroadandsubjectivedecisionsonaccountingtreatments
Reflecting the aggregated and approximatenature of thesourcedata Fitchappliesa seriesof commonadjustmentsoutlined below Adjustments that are not material to thecreditanalysisdonothavetobemade
A detailed review of Fitchrsquos financial adjustments can be found in appendix 1 of Fitchrsquos criteria report for non-financial corporates httpswwwfitchratingscomresearchcorporate-financecorporate-rating-criteria-01-05-2020
Main Analytical Adjustments
fitchratingscom 11
Adjustments Description
Leases Creatinganequivalenceindebtmetricsforfinancingundertakenusingleasesinselectedsectors
Hybrids Measuringthedegreetowhichanissuancewithhybridfeaturesmayqualifyfortreatingas50of100equityinourleveragemetrics
Pensions Measuringtheimpactofpensionexposuresonourleverageandcashflowanalysis
DebtFactoring Adjustmentstoreflectthesaleofreceivablesinourdebtmetricsandrecoverygivendefaultanalysis
CashAdjustments Adjustmentstoreflectdifferentqualitiesofcashandotherliquidassets
AdjustingConsolidatedProfilesforGroupStructures
Adjustmentstoreflectthedegreeofownershipandcontrolofcashflowsfromvaryinglevelsofownershiporlegaloperationalseparation
HoldCoPIKandShareholderLoans MeasuringthedegreetowhichshareholderloansandPayment-in-Kindnoteswouldbetreatedaspartoftheratedentityrsquosleverageburden
DebtFair-ValueAdjustments Adjustmentstoensuredebtreviewedisthedebtwhichwillbepayableontheinstrumentrsquosmaturityassuminganentityremainsagoingconcern
AdjustmentsforFinancialServicesActivities
Adjustmentstofinancialservices(lsquoFSrsquo)operationswithincorporatestoreflectFitchrsquosassumptionthatdebtallocatedtotheFSoperationsisrepaidusingthecashflowoftheFSoperationsincludingassumptionsforanyimputedadditionalcapitalfortheFSbusinesswhichFitchmayassumetobeaddedtotheindustrialentityrsquosdebtburden
Contact Us
ALL FITCHCREDITRATINGSARESUBJECTTOCERTAINLIMITATIONSANDDISCLAIMERS PLEASEREADTHESELIMITATIONSANDDISCLAIMERSBY FOLLOWINGTHIS LINKHTTPSWWWFITCHRATINGSCOMSITEDEFINITIONS IN ADDITION RATING DEFINITIONS AND THE TERMSOF USEOF SUCH RATINGS ARE AVAILABLEON THE AGENCYrsquoS PUBLICWEB SITE ATWWWFITCHRATINGSCOMPUBLISHEDRATINGSCRITERIAANDMETHODOLOGIESAREAVAILABLEFROMTHISSITEATALLTIMESFITCHrsquoSCODEOFCONDUCTCONFIDENTIALITYCONFLICTSOFINTERESTAFFILIATEFIREWALLCOMPLIANCEANDOTHERRELEVANTPOLICIESANDPROCEDURESAREALSOAVAILABLEFROMTHECODEOFCONDUCTSECTIONOFTHISSITEFITCHMAYHAVEPROVIDEDANOTHERPERMISSIBLESERVICETOTHERATEDENTITYORITSRELATEDTHIRDPARTIESDETAILSOFTHISSERVICEFORRATINGSFORWHICHTHELEADANALYSTISBASEDINANEU-REGISTEREDENTITYCANBEFOUNDONTHEENTITYSUMMARYPAGEFORTHISISSUERONTHEFITCHWEBSITECopyrightcopy2020byFitchRatingsIncFitchRatingsLtdanditssubsidiaries33WhitehallStreetNYNY10004Telephone1-800-753-4824(212)908-0500Fax(212)480-4435ReproductionorretransmissioninwholeorinpartisprohibitedexceptbypermissionAllrightsreservedInissuingandmaintainingitsratingsandinmakingotherreports(includingforecastinformation)FitchreliesonfactualinformationitreceivesfromissuersandunderwritersandfromothersourcesFitchbelievestobecredibleFitchconductsareasonable investigationofthefactual informationrelieduponby it inaccordancewith itsratingsmethodologyandobtainsreasonableverificationofthatinformationfromindependentsourcestotheextentsuchsourcesareavailableforagivensecurityorinagivenjurisdictionThemannerofFitchrsquosfactualinvestigationandthescopeofthethird-partyverificationitobtainswillvarydependingonthenatureoftheratedsecurityanditsissuertherequirementsandpracticesinthejurisdictioninwhichtheratedsecurityisofferedandsoldandortheissuerislocatedtheavailabilityandnatureofrelevantpublicinformationaccesstothemanagementoftheissueranditsadviserstheavailabilityofpre-existingthird-partyverificationssuchasauditreportsagreed-uponprocedureslettersappraisalsactuarialreportsengineeringreportslegalopinionsandotherreportsprovidedbythirdpartiestheavailabilityofindependentandcompetentthird-partyverificationsourceswithrespecttotheparticularsecurityorintheparticularjurisdictionoftheissuerandavarietyofotherfactorsUsersofFitchrsquosratingsandreportsshouldunderstandthatneitheranenhancedfactualinvestigationnoranythird-partyverificationcanensurethatalloftheinformationFitchreliesoninconnectionwitharatingorareportwillbeaccurateandcompleteUltimatelytheissueranditsadvisersareresponsiblefortheaccuracyoftheinformationtheyprovidetoFitchandtothemarketinofferingdocumentsandotherreportsInissuingitsratingsanditsreportsFitchmustrelyontheworkofexpertsincludingindependentauditorswithrespecttofinancialstatementsandattorneyswithrespecttolegalandtaxmattersFurtherratingsandforecastsoffinancialandotherinformationareinherentlyforward-lookingandembodyassumptionsandpredictionsaboutfutureeventsthatbytheirnaturecannotbeverifiedasfactsAsaresultdespiteanyverificationofcurrentfactsratingsandforecastscanbeaffectedbyfutureeventsorconditionsthatwerenotanticipatedatthetimearatingorforecastwasissuedoraffirmedTheinformationinthisreportisprovidedldquoasisrdquowithoutanyrepresentationorwarrantyofanykindandFitchdoesnotrepresentorwarrantthatthereportoranyofitscontentswillmeetanyoftherequirementsofarecipientofthereportAFitchratingisanopinionastothecreditworthinessofasecurityThisopinionandreportsmadebyFitcharebasedonestablishedcriteriaandmethodologiesthatFitchiscontinuouslyevaluatingandupdatingThereforeratingsandreportsarethecollectiveworkproductofFitchandnoindividualorgroupofindividualsissolelyresponsibleforaratingorareportTheratingdoesnotaddresstheriskoflossduetorisksotherthancreditriskunlesssuchriskisspecificallymentionedFitchisnotengagedintheofferorsaleofanysecurityAllFitchreportshavesharedauthorshipIndividualsidentifiedinaFitchreportwereinvolvedinbutarenotsolelyresponsiblefortheopinionsstatedthereinTheindividualsarenamedforcontactpurposesonlyAreportprovidingaFitchratingisneitheraprospectusnorasubstitutefortheinformationassembledverifiedandpresentedtoinvestorsbytheissueranditsagentsinconnectionwiththesaleofthesecuritiesRatingsmaybechangedorwithdrawnatanytimeforanyreasoninthesolediscretionofFitchFitchdoesnotprovideinvestmentadviceofanysortRatingsarenotarecommendationtobuysellorholdanysecurityRatingsdonotcommentontheadequacyofmarketpricethesuitabilityofanysecurityforaparticularinvestororthetax-exemptnatureortaxabilityofpaymentsmadeinrespecttoanysecurityFitchreceivesfeesfromissuersinsurersguarantorsotherobligorsandunderwritersforratingsecuritiesSuchfeesgenerallyvaryfromUS$1000toUS$750000(ortheapplicablecurrencyequivalent)perissueIncertaincasesFitchwillratealloranumberofissuesissuedbyaparticularissuerorinsuredorguaranteedbyaparticularinsurerorguarantorforasingleannualfeeSuchfeesareexpectedtovaryfromUS$10000toUS$1500000(ortheapplicablecurrencyequivalent)TheassignmentpublicationordisseminationofaratingbyFitchshallnotconstituteaconsentbyFitchtouseitsnameasanexpertinconnectionwithanyregistrationstatementfiledundertheUnitedStatessecuritieslawstheFinancialServicesandMarketsActof2000oftheUnitedKingdomorthesecuritieslawsofanyparticularjurisdictionDuetotherelativeefficiencyofelectronicpublishinganddistributionFitchresearchmaybeavailabletoelectronicsubscribersuptothreedaysearlierthantoprintsubscribersForAustraliaNewZealandTaiwanandSouthKoreaonlyFitchAustraliaPtyLtdholdsanAustralianfinancialserviceslicense(AFSlicenseno337123)whichauthorizesittoprovidecreditratingstowholesaleclientsonlyCreditratingsinformationpublishedbyFitchisnotintendedtobeusedbypersonswhoareretailclientswithinthemeaningoftheCorporationsAct2001DC-177
Scott CassieSeniorDirectorHead-NorthAmericanCorporatesIssuerBusinessRelationshipManagementFitchRatings300West57StNewYorkNY10019scottcassiefitchratingscom Tom Muoio ManagingDirectorCorporatesandStructuredCreditBusinessRelationshipManagementFitch Ratings 30 North Colonnade Canary Wharf LondonE145GNUKtommuoiofitchratingscom
Kathleen Fuentes HoltzmanManagingDirectorLatinAmericaFitchRatings300West57thStreetNewYorkNYkathleenholtzmanfitchratingscom
Ng Sing Chan ManagingDirectorHeadofAPACBusinessOriginationFitchRatings1RafflesQuaySingapore048583singchanngfitchratingscom
fitchratingscom 9
Main Ratios (Cont)
Ratio Numerator Denominator
OpEBITDAR(interestpaid+leaseexpense)(x)
OperatingEBITDAR+RecurringDividendsreceivedfromAssociatesandEquityMethodInvestments-DividendspaidtoMinorities(oralternativelynetincomeattributabletonon-controllinginterests)
InterestPaid+OperatingLeaseExpenseforCapitalisedLeasedAssets
CFOcapitalexpenditures(x) CashFlowfromOperations[CFO] Capital(Expenditures)
CapexCFO() Capital(Expenditures) CashFlowfromOperations[CFO]
Liquidity ratios
FFOdebtservicecover FFO+Interestpaidminusinterestreceived+PreferredDividends+OperatingLeaseExpenseforCapitalisedLeasedAssets
InterestPaid+PreferredDividends+CurrentDebtMaturities
Liquidity(liquidityratio) Availablecash+undrawnportionofcommittedfacilities+FCF
12-monthdebtMaturities
SourceFitchRatings
fitchratingscom 10
Fitch encourages an analytical climate where financialstatements are regarded as a source material providingbroad indications of the financial position rather than as acomprehensive registerof immutable factsThe limitationsofthesourcematerialndashcorporategroupfinancialstatementsndasharemanyandvaried
Forexampleitisnotunusualformajorgroupstobecomposedof hundreds of legal entities Financial statements presenta high-level consolidated picture but material differenceswillexistintheprecisefinancialpositionndashincomeexpenseobligations and cash-generating ability ndash of different legalentitieswithinaconsolidated group whichmay besweptupandmaskedbytheprocessofaccountingconsolidation
Similarly theapparentlysmoothandorderlysequentialflowof thepublishedincomeandcashflowdoes notreflectanactuallinearflowofpaymentsthroughacompanyrsquoshandsoralegalwaterfallofprioritiesbutratheraggregatesatheoreticalflowInpracticethecompanydoesnotwriteachequeforits
entireannualoperatingexpenditurefollowedthenextmonthby one amount for its annual interest bill followed by oneinstalmentforitstaxbillfollowedonlythenbyonepaymentforitsannualcapitalexpenditurebillandsoon
Furthermorefinancialstatementspresentonlyasnapshotofassetsandliabilitiesandaresubjecttooftenverybroadandsubjectivedecisionsonaccountingtreatments
Reflecting the aggregated and approximatenature of thesourcedata Fitchappliesa seriesof commonadjustmentsoutlined below Adjustments that are not material to thecreditanalysisdonothavetobemade
A detailed review of Fitchrsquos financial adjustments can be found in appendix 1 of Fitchrsquos criteria report for non-financial corporates httpswwwfitchratingscomresearchcorporate-financecorporate-rating-criteria-01-05-2020
Main Analytical Adjustments
fitchratingscom 11
Adjustments Description
Leases Creatinganequivalenceindebtmetricsforfinancingundertakenusingleasesinselectedsectors
Hybrids Measuringthedegreetowhichanissuancewithhybridfeaturesmayqualifyfortreatingas50of100equityinourleveragemetrics
Pensions Measuringtheimpactofpensionexposuresonourleverageandcashflowanalysis
DebtFactoring Adjustmentstoreflectthesaleofreceivablesinourdebtmetricsandrecoverygivendefaultanalysis
CashAdjustments Adjustmentstoreflectdifferentqualitiesofcashandotherliquidassets
AdjustingConsolidatedProfilesforGroupStructures
Adjustmentstoreflectthedegreeofownershipandcontrolofcashflowsfromvaryinglevelsofownershiporlegaloperationalseparation
HoldCoPIKandShareholderLoans MeasuringthedegreetowhichshareholderloansandPayment-in-Kindnoteswouldbetreatedaspartoftheratedentityrsquosleverageburden
DebtFair-ValueAdjustments Adjustmentstoensuredebtreviewedisthedebtwhichwillbepayableontheinstrumentrsquosmaturityassuminganentityremainsagoingconcern
AdjustmentsforFinancialServicesActivities
Adjustmentstofinancialservices(lsquoFSrsquo)operationswithincorporatestoreflectFitchrsquosassumptionthatdebtallocatedtotheFSoperationsisrepaidusingthecashflowoftheFSoperationsincludingassumptionsforanyimputedadditionalcapitalfortheFSbusinesswhichFitchmayassumetobeaddedtotheindustrialentityrsquosdebtburden
Contact Us
ALL FITCHCREDITRATINGSARESUBJECTTOCERTAINLIMITATIONSANDDISCLAIMERS PLEASEREADTHESELIMITATIONSANDDISCLAIMERSBY FOLLOWINGTHIS LINKHTTPSWWWFITCHRATINGSCOMSITEDEFINITIONS IN ADDITION RATING DEFINITIONS AND THE TERMSOF USEOF SUCH RATINGS ARE AVAILABLEON THE AGENCYrsquoS PUBLICWEB SITE ATWWWFITCHRATINGSCOMPUBLISHEDRATINGSCRITERIAANDMETHODOLOGIESAREAVAILABLEFROMTHISSITEATALLTIMESFITCHrsquoSCODEOFCONDUCTCONFIDENTIALITYCONFLICTSOFINTERESTAFFILIATEFIREWALLCOMPLIANCEANDOTHERRELEVANTPOLICIESANDPROCEDURESAREALSOAVAILABLEFROMTHECODEOFCONDUCTSECTIONOFTHISSITEFITCHMAYHAVEPROVIDEDANOTHERPERMISSIBLESERVICETOTHERATEDENTITYORITSRELATEDTHIRDPARTIESDETAILSOFTHISSERVICEFORRATINGSFORWHICHTHELEADANALYSTISBASEDINANEU-REGISTEREDENTITYCANBEFOUNDONTHEENTITYSUMMARYPAGEFORTHISISSUERONTHEFITCHWEBSITECopyrightcopy2020byFitchRatingsIncFitchRatingsLtdanditssubsidiaries33WhitehallStreetNYNY10004Telephone1-800-753-4824(212)908-0500Fax(212)480-4435ReproductionorretransmissioninwholeorinpartisprohibitedexceptbypermissionAllrightsreservedInissuingandmaintainingitsratingsandinmakingotherreports(includingforecastinformation)FitchreliesonfactualinformationitreceivesfromissuersandunderwritersandfromothersourcesFitchbelievestobecredibleFitchconductsareasonable investigationofthefactual informationrelieduponby it inaccordancewith itsratingsmethodologyandobtainsreasonableverificationofthatinformationfromindependentsourcestotheextentsuchsourcesareavailableforagivensecurityorinagivenjurisdictionThemannerofFitchrsquosfactualinvestigationandthescopeofthethird-partyverificationitobtainswillvarydependingonthenatureoftheratedsecurityanditsissuertherequirementsandpracticesinthejurisdictioninwhichtheratedsecurityisofferedandsoldandortheissuerislocatedtheavailabilityandnatureofrelevantpublicinformationaccesstothemanagementoftheissueranditsadviserstheavailabilityofpre-existingthird-partyverificationssuchasauditreportsagreed-uponprocedureslettersappraisalsactuarialreportsengineeringreportslegalopinionsandotherreportsprovidedbythirdpartiestheavailabilityofindependentandcompetentthird-partyverificationsourceswithrespecttotheparticularsecurityorintheparticularjurisdictionoftheissuerandavarietyofotherfactorsUsersofFitchrsquosratingsandreportsshouldunderstandthatneitheranenhancedfactualinvestigationnoranythird-partyverificationcanensurethatalloftheinformationFitchreliesoninconnectionwitharatingorareportwillbeaccurateandcompleteUltimatelytheissueranditsadvisersareresponsiblefortheaccuracyoftheinformationtheyprovidetoFitchandtothemarketinofferingdocumentsandotherreportsInissuingitsratingsanditsreportsFitchmustrelyontheworkofexpertsincludingindependentauditorswithrespecttofinancialstatementsandattorneyswithrespecttolegalandtaxmattersFurtherratingsandforecastsoffinancialandotherinformationareinherentlyforward-lookingandembodyassumptionsandpredictionsaboutfutureeventsthatbytheirnaturecannotbeverifiedasfactsAsaresultdespiteanyverificationofcurrentfactsratingsandforecastscanbeaffectedbyfutureeventsorconditionsthatwerenotanticipatedatthetimearatingorforecastwasissuedoraffirmedTheinformationinthisreportisprovidedldquoasisrdquowithoutanyrepresentationorwarrantyofanykindandFitchdoesnotrepresentorwarrantthatthereportoranyofitscontentswillmeetanyoftherequirementsofarecipientofthereportAFitchratingisanopinionastothecreditworthinessofasecurityThisopinionandreportsmadebyFitcharebasedonestablishedcriteriaandmethodologiesthatFitchiscontinuouslyevaluatingandupdatingThereforeratingsandreportsarethecollectiveworkproductofFitchandnoindividualorgroupofindividualsissolelyresponsibleforaratingorareportTheratingdoesnotaddresstheriskoflossduetorisksotherthancreditriskunlesssuchriskisspecificallymentionedFitchisnotengagedintheofferorsaleofanysecurityAllFitchreportshavesharedauthorshipIndividualsidentifiedinaFitchreportwereinvolvedinbutarenotsolelyresponsiblefortheopinionsstatedthereinTheindividualsarenamedforcontactpurposesonlyAreportprovidingaFitchratingisneitheraprospectusnorasubstitutefortheinformationassembledverifiedandpresentedtoinvestorsbytheissueranditsagentsinconnectionwiththesaleofthesecuritiesRatingsmaybechangedorwithdrawnatanytimeforanyreasoninthesolediscretionofFitchFitchdoesnotprovideinvestmentadviceofanysortRatingsarenotarecommendationtobuysellorholdanysecurityRatingsdonotcommentontheadequacyofmarketpricethesuitabilityofanysecurityforaparticularinvestororthetax-exemptnatureortaxabilityofpaymentsmadeinrespecttoanysecurityFitchreceivesfeesfromissuersinsurersguarantorsotherobligorsandunderwritersforratingsecuritiesSuchfeesgenerallyvaryfromUS$1000toUS$750000(ortheapplicablecurrencyequivalent)perissueIncertaincasesFitchwillratealloranumberofissuesissuedbyaparticularissuerorinsuredorguaranteedbyaparticularinsurerorguarantorforasingleannualfeeSuchfeesareexpectedtovaryfromUS$10000toUS$1500000(ortheapplicablecurrencyequivalent)TheassignmentpublicationordisseminationofaratingbyFitchshallnotconstituteaconsentbyFitchtouseitsnameasanexpertinconnectionwithanyregistrationstatementfiledundertheUnitedStatessecuritieslawstheFinancialServicesandMarketsActof2000oftheUnitedKingdomorthesecuritieslawsofanyparticularjurisdictionDuetotherelativeefficiencyofelectronicpublishinganddistributionFitchresearchmaybeavailabletoelectronicsubscribersuptothreedaysearlierthantoprintsubscribersForAustraliaNewZealandTaiwanandSouthKoreaonlyFitchAustraliaPtyLtdholdsanAustralianfinancialserviceslicense(AFSlicenseno337123)whichauthorizesittoprovidecreditratingstowholesaleclientsonlyCreditratingsinformationpublishedbyFitchisnotintendedtobeusedbypersonswhoareretailclientswithinthemeaningoftheCorporationsAct2001DC-177
Scott CassieSeniorDirectorHead-NorthAmericanCorporatesIssuerBusinessRelationshipManagementFitchRatings300West57StNewYorkNY10019scottcassiefitchratingscom Tom Muoio ManagingDirectorCorporatesandStructuredCreditBusinessRelationshipManagementFitch Ratings 30 North Colonnade Canary Wharf LondonE145GNUKtommuoiofitchratingscom
Kathleen Fuentes HoltzmanManagingDirectorLatinAmericaFitchRatings300West57thStreetNewYorkNYkathleenholtzmanfitchratingscom
Ng Sing Chan ManagingDirectorHeadofAPACBusinessOriginationFitchRatings1RafflesQuaySingapore048583singchanngfitchratingscom
fitchratingscom 10
Fitch encourages an analytical climate where financialstatements are regarded as a source material providingbroad indications of the financial position rather than as acomprehensive registerof immutable factsThe limitationsofthesourcematerialndashcorporategroupfinancialstatementsndasharemanyandvaried
Forexampleitisnotunusualformajorgroupstobecomposedof hundreds of legal entities Financial statements presenta high-level consolidated picture but material differenceswillexistintheprecisefinancialpositionndashincomeexpenseobligations and cash-generating ability ndash of different legalentitieswithinaconsolidated group whichmay besweptupandmaskedbytheprocessofaccountingconsolidation
Similarly theapparentlysmoothandorderlysequentialflowof thepublishedincomeandcashflowdoes notreflectanactuallinearflowofpaymentsthroughacompanyrsquoshandsoralegalwaterfallofprioritiesbutratheraggregatesatheoreticalflowInpracticethecompanydoesnotwriteachequeforits
entireannualoperatingexpenditurefollowedthenextmonthby one amount for its annual interest bill followed by oneinstalmentforitstaxbillfollowedonlythenbyonepaymentforitsannualcapitalexpenditurebillandsoon
Furthermorefinancialstatementspresentonlyasnapshotofassetsandliabilitiesandaresubjecttooftenverybroadandsubjectivedecisionsonaccountingtreatments
Reflecting the aggregated and approximatenature of thesourcedata Fitchappliesa seriesof commonadjustmentsoutlined below Adjustments that are not material to thecreditanalysisdonothavetobemade
A detailed review of Fitchrsquos financial adjustments can be found in appendix 1 of Fitchrsquos criteria report for non-financial corporates httpswwwfitchratingscomresearchcorporate-financecorporate-rating-criteria-01-05-2020
Main Analytical Adjustments
fitchratingscom 11
Adjustments Description
Leases Creatinganequivalenceindebtmetricsforfinancingundertakenusingleasesinselectedsectors
Hybrids Measuringthedegreetowhichanissuancewithhybridfeaturesmayqualifyfortreatingas50of100equityinourleveragemetrics
Pensions Measuringtheimpactofpensionexposuresonourleverageandcashflowanalysis
DebtFactoring Adjustmentstoreflectthesaleofreceivablesinourdebtmetricsandrecoverygivendefaultanalysis
CashAdjustments Adjustmentstoreflectdifferentqualitiesofcashandotherliquidassets
AdjustingConsolidatedProfilesforGroupStructures
Adjustmentstoreflectthedegreeofownershipandcontrolofcashflowsfromvaryinglevelsofownershiporlegaloperationalseparation
HoldCoPIKandShareholderLoans MeasuringthedegreetowhichshareholderloansandPayment-in-Kindnoteswouldbetreatedaspartoftheratedentityrsquosleverageburden
DebtFair-ValueAdjustments Adjustmentstoensuredebtreviewedisthedebtwhichwillbepayableontheinstrumentrsquosmaturityassuminganentityremainsagoingconcern
AdjustmentsforFinancialServicesActivities
Adjustmentstofinancialservices(lsquoFSrsquo)operationswithincorporatestoreflectFitchrsquosassumptionthatdebtallocatedtotheFSoperationsisrepaidusingthecashflowoftheFSoperationsincludingassumptionsforanyimputedadditionalcapitalfortheFSbusinesswhichFitchmayassumetobeaddedtotheindustrialentityrsquosdebtburden
Contact Us
ALL FITCHCREDITRATINGSARESUBJECTTOCERTAINLIMITATIONSANDDISCLAIMERS PLEASEREADTHESELIMITATIONSANDDISCLAIMERSBY FOLLOWINGTHIS LINKHTTPSWWWFITCHRATINGSCOMSITEDEFINITIONS IN ADDITION RATING DEFINITIONS AND THE TERMSOF USEOF SUCH RATINGS ARE AVAILABLEON THE AGENCYrsquoS PUBLICWEB SITE ATWWWFITCHRATINGSCOMPUBLISHEDRATINGSCRITERIAANDMETHODOLOGIESAREAVAILABLEFROMTHISSITEATALLTIMESFITCHrsquoSCODEOFCONDUCTCONFIDENTIALITYCONFLICTSOFINTERESTAFFILIATEFIREWALLCOMPLIANCEANDOTHERRELEVANTPOLICIESANDPROCEDURESAREALSOAVAILABLEFROMTHECODEOFCONDUCTSECTIONOFTHISSITEFITCHMAYHAVEPROVIDEDANOTHERPERMISSIBLESERVICETOTHERATEDENTITYORITSRELATEDTHIRDPARTIESDETAILSOFTHISSERVICEFORRATINGSFORWHICHTHELEADANALYSTISBASEDINANEU-REGISTEREDENTITYCANBEFOUNDONTHEENTITYSUMMARYPAGEFORTHISISSUERONTHEFITCHWEBSITECopyrightcopy2020byFitchRatingsIncFitchRatingsLtdanditssubsidiaries33WhitehallStreetNYNY10004Telephone1-800-753-4824(212)908-0500Fax(212)480-4435ReproductionorretransmissioninwholeorinpartisprohibitedexceptbypermissionAllrightsreservedInissuingandmaintainingitsratingsandinmakingotherreports(includingforecastinformation)FitchreliesonfactualinformationitreceivesfromissuersandunderwritersandfromothersourcesFitchbelievestobecredibleFitchconductsareasonable investigationofthefactual informationrelieduponby it inaccordancewith itsratingsmethodologyandobtainsreasonableverificationofthatinformationfromindependentsourcestotheextentsuchsourcesareavailableforagivensecurityorinagivenjurisdictionThemannerofFitchrsquosfactualinvestigationandthescopeofthethird-partyverificationitobtainswillvarydependingonthenatureoftheratedsecurityanditsissuertherequirementsandpracticesinthejurisdictioninwhichtheratedsecurityisofferedandsoldandortheissuerislocatedtheavailabilityandnatureofrelevantpublicinformationaccesstothemanagementoftheissueranditsadviserstheavailabilityofpre-existingthird-partyverificationssuchasauditreportsagreed-uponprocedureslettersappraisalsactuarialreportsengineeringreportslegalopinionsandotherreportsprovidedbythirdpartiestheavailabilityofindependentandcompetentthird-partyverificationsourceswithrespecttotheparticularsecurityorintheparticularjurisdictionoftheissuerandavarietyofotherfactorsUsersofFitchrsquosratingsandreportsshouldunderstandthatneitheranenhancedfactualinvestigationnoranythird-partyverificationcanensurethatalloftheinformationFitchreliesoninconnectionwitharatingorareportwillbeaccurateandcompleteUltimatelytheissueranditsadvisersareresponsiblefortheaccuracyoftheinformationtheyprovidetoFitchandtothemarketinofferingdocumentsandotherreportsInissuingitsratingsanditsreportsFitchmustrelyontheworkofexpertsincludingindependentauditorswithrespecttofinancialstatementsandattorneyswithrespecttolegalandtaxmattersFurtherratingsandforecastsoffinancialandotherinformationareinherentlyforward-lookingandembodyassumptionsandpredictionsaboutfutureeventsthatbytheirnaturecannotbeverifiedasfactsAsaresultdespiteanyverificationofcurrentfactsratingsandforecastscanbeaffectedbyfutureeventsorconditionsthatwerenotanticipatedatthetimearatingorforecastwasissuedoraffirmedTheinformationinthisreportisprovidedldquoasisrdquowithoutanyrepresentationorwarrantyofanykindandFitchdoesnotrepresentorwarrantthatthereportoranyofitscontentswillmeetanyoftherequirementsofarecipientofthereportAFitchratingisanopinionastothecreditworthinessofasecurityThisopinionandreportsmadebyFitcharebasedonestablishedcriteriaandmethodologiesthatFitchiscontinuouslyevaluatingandupdatingThereforeratingsandreportsarethecollectiveworkproductofFitchandnoindividualorgroupofindividualsissolelyresponsibleforaratingorareportTheratingdoesnotaddresstheriskoflossduetorisksotherthancreditriskunlesssuchriskisspecificallymentionedFitchisnotengagedintheofferorsaleofanysecurityAllFitchreportshavesharedauthorshipIndividualsidentifiedinaFitchreportwereinvolvedinbutarenotsolelyresponsiblefortheopinionsstatedthereinTheindividualsarenamedforcontactpurposesonlyAreportprovidingaFitchratingisneitheraprospectusnorasubstitutefortheinformationassembledverifiedandpresentedtoinvestorsbytheissueranditsagentsinconnectionwiththesaleofthesecuritiesRatingsmaybechangedorwithdrawnatanytimeforanyreasoninthesolediscretionofFitchFitchdoesnotprovideinvestmentadviceofanysortRatingsarenotarecommendationtobuysellorholdanysecurityRatingsdonotcommentontheadequacyofmarketpricethesuitabilityofanysecurityforaparticularinvestororthetax-exemptnatureortaxabilityofpaymentsmadeinrespecttoanysecurityFitchreceivesfeesfromissuersinsurersguarantorsotherobligorsandunderwritersforratingsecuritiesSuchfeesgenerallyvaryfromUS$1000toUS$750000(ortheapplicablecurrencyequivalent)perissueIncertaincasesFitchwillratealloranumberofissuesissuedbyaparticularissuerorinsuredorguaranteedbyaparticularinsurerorguarantorforasingleannualfeeSuchfeesareexpectedtovaryfromUS$10000toUS$1500000(ortheapplicablecurrencyequivalent)TheassignmentpublicationordisseminationofaratingbyFitchshallnotconstituteaconsentbyFitchtouseitsnameasanexpertinconnectionwithanyregistrationstatementfiledundertheUnitedStatessecuritieslawstheFinancialServicesandMarketsActof2000oftheUnitedKingdomorthesecuritieslawsofanyparticularjurisdictionDuetotherelativeefficiencyofelectronicpublishinganddistributionFitchresearchmaybeavailabletoelectronicsubscribersuptothreedaysearlierthantoprintsubscribersForAustraliaNewZealandTaiwanandSouthKoreaonlyFitchAustraliaPtyLtdholdsanAustralianfinancialserviceslicense(AFSlicenseno337123)whichauthorizesittoprovidecreditratingstowholesaleclientsonlyCreditratingsinformationpublishedbyFitchisnotintendedtobeusedbypersonswhoareretailclientswithinthemeaningoftheCorporationsAct2001DC-177
Scott CassieSeniorDirectorHead-NorthAmericanCorporatesIssuerBusinessRelationshipManagementFitchRatings300West57StNewYorkNY10019scottcassiefitchratingscom Tom Muoio ManagingDirectorCorporatesandStructuredCreditBusinessRelationshipManagementFitch Ratings 30 North Colonnade Canary Wharf LondonE145GNUKtommuoiofitchratingscom
Kathleen Fuentes HoltzmanManagingDirectorLatinAmericaFitchRatings300West57thStreetNewYorkNYkathleenholtzmanfitchratingscom
Ng Sing Chan ManagingDirectorHeadofAPACBusinessOriginationFitchRatings1RafflesQuaySingapore048583singchanngfitchratingscom
fitchratingscom 11
Adjustments Description
Leases Creatinganequivalenceindebtmetricsforfinancingundertakenusingleasesinselectedsectors
Hybrids Measuringthedegreetowhichanissuancewithhybridfeaturesmayqualifyfortreatingas50of100equityinourleveragemetrics
Pensions Measuringtheimpactofpensionexposuresonourleverageandcashflowanalysis
DebtFactoring Adjustmentstoreflectthesaleofreceivablesinourdebtmetricsandrecoverygivendefaultanalysis
CashAdjustments Adjustmentstoreflectdifferentqualitiesofcashandotherliquidassets
AdjustingConsolidatedProfilesforGroupStructures
Adjustmentstoreflectthedegreeofownershipandcontrolofcashflowsfromvaryinglevelsofownershiporlegaloperationalseparation
HoldCoPIKandShareholderLoans MeasuringthedegreetowhichshareholderloansandPayment-in-Kindnoteswouldbetreatedaspartoftheratedentityrsquosleverageburden
DebtFair-ValueAdjustments Adjustmentstoensuredebtreviewedisthedebtwhichwillbepayableontheinstrumentrsquosmaturityassuminganentityremainsagoingconcern
AdjustmentsforFinancialServicesActivities
Adjustmentstofinancialservices(lsquoFSrsquo)operationswithincorporatestoreflectFitchrsquosassumptionthatdebtallocatedtotheFSoperationsisrepaidusingthecashflowoftheFSoperationsincludingassumptionsforanyimputedadditionalcapitalfortheFSbusinesswhichFitchmayassumetobeaddedtotheindustrialentityrsquosdebtburden
Contact Us
ALL FITCHCREDITRATINGSARESUBJECTTOCERTAINLIMITATIONSANDDISCLAIMERS PLEASEREADTHESELIMITATIONSANDDISCLAIMERSBY FOLLOWINGTHIS LINKHTTPSWWWFITCHRATINGSCOMSITEDEFINITIONS IN ADDITION RATING DEFINITIONS AND THE TERMSOF USEOF SUCH RATINGS ARE AVAILABLEON THE AGENCYrsquoS PUBLICWEB SITE ATWWWFITCHRATINGSCOMPUBLISHEDRATINGSCRITERIAANDMETHODOLOGIESAREAVAILABLEFROMTHISSITEATALLTIMESFITCHrsquoSCODEOFCONDUCTCONFIDENTIALITYCONFLICTSOFINTERESTAFFILIATEFIREWALLCOMPLIANCEANDOTHERRELEVANTPOLICIESANDPROCEDURESAREALSOAVAILABLEFROMTHECODEOFCONDUCTSECTIONOFTHISSITEFITCHMAYHAVEPROVIDEDANOTHERPERMISSIBLESERVICETOTHERATEDENTITYORITSRELATEDTHIRDPARTIESDETAILSOFTHISSERVICEFORRATINGSFORWHICHTHELEADANALYSTISBASEDINANEU-REGISTEREDENTITYCANBEFOUNDONTHEENTITYSUMMARYPAGEFORTHISISSUERONTHEFITCHWEBSITECopyrightcopy2020byFitchRatingsIncFitchRatingsLtdanditssubsidiaries33WhitehallStreetNYNY10004Telephone1-800-753-4824(212)908-0500Fax(212)480-4435ReproductionorretransmissioninwholeorinpartisprohibitedexceptbypermissionAllrightsreservedInissuingandmaintainingitsratingsandinmakingotherreports(includingforecastinformation)FitchreliesonfactualinformationitreceivesfromissuersandunderwritersandfromothersourcesFitchbelievestobecredibleFitchconductsareasonable investigationofthefactual informationrelieduponby it inaccordancewith itsratingsmethodologyandobtainsreasonableverificationofthatinformationfromindependentsourcestotheextentsuchsourcesareavailableforagivensecurityorinagivenjurisdictionThemannerofFitchrsquosfactualinvestigationandthescopeofthethird-partyverificationitobtainswillvarydependingonthenatureoftheratedsecurityanditsissuertherequirementsandpracticesinthejurisdictioninwhichtheratedsecurityisofferedandsoldandortheissuerislocatedtheavailabilityandnatureofrelevantpublicinformationaccesstothemanagementoftheissueranditsadviserstheavailabilityofpre-existingthird-partyverificationssuchasauditreportsagreed-uponprocedureslettersappraisalsactuarialreportsengineeringreportslegalopinionsandotherreportsprovidedbythirdpartiestheavailabilityofindependentandcompetentthird-partyverificationsourceswithrespecttotheparticularsecurityorintheparticularjurisdictionoftheissuerandavarietyofotherfactorsUsersofFitchrsquosratingsandreportsshouldunderstandthatneitheranenhancedfactualinvestigationnoranythird-partyverificationcanensurethatalloftheinformationFitchreliesoninconnectionwitharatingorareportwillbeaccurateandcompleteUltimatelytheissueranditsadvisersareresponsiblefortheaccuracyoftheinformationtheyprovidetoFitchandtothemarketinofferingdocumentsandotherreportsInissuingitsratingsanditsreportsFitchmustrelyontheworkofexpertsincludingindependentauditorswithrespecttofinancialstatementsandattorneyswithrespecttolegalandtaxmattersFurtherratingsandforecastsoffinancialandotherinformationareinherentlyforward-lookingandembodyassumptionsandpredictionsaboutfutureeventsthatbytheirnaturecannotbeverifiedasfactsAsaresultdespiteanyverificationofcurrentfactsratingsandforecastscanbeaffectedbyfutureeventsorconditionsthatwerenotanticipatedatthetimearatingorforecastwasissuedoraffirmedTheinformationinthisreportisprovidedldquoasisrdquowithoutanyrepresentationorwarrantyofanykindandFitchdoesnotrepresentorwarrantthatthereportoranyofitscontentswillmeetanyoftherequirementsofarecipientofthereportAFitchratingisanopinionastothecreditworthinessofasecurityThisopinionandreportsmadebyFitcharebasedonestablishedcriteriaandmethodologiesthatFitchiscontinuouslyevaluatingandupdatingThereforeratingsandreportsarethecollectiveworkproductofFitchandnoindividualorgroupofindividualsissolelyresponsibleforaratingorareportTheratingdoesnotaddresstheriskoflossduetorisksotherthancreditriskunlesssuchriskisspecificallymentionedFitchisnotengagedintheofferorsaleofanysecurityAllFitchreportshavesharedauthorshipIndividualsidentifiedinaFitchreportwereinvolvedinbutarenotsolelyresponsiblefortheopinionsstatedthereinTheindividualsarenamedforcontactpurposesonlyAreportprovidingaFitchratingisneitheraprospectusnorasubstitutefortheinformationassembledverifiedandpresentedtoinvestorsbytheissueranditsagentsinconnectionwiththesaleofthesecuritiesRatingsmaybechangedorwithdrawnatanytimeforanyreasoninthesolediscretionofFitchFitchdoesnotprovideinvestmentadviceofanysortRatingsarenotarecommendationtobuysellorholdanysecurityRatingsdonotcommentontheadequacyofmarketpricethesuitabilityofanysecurityforaparticularinvestororthetax-exemptnatureortaxabilityofpaymentsmadeinrespecttoanysecurityFitchreceivesfeesfromissuersinsurersguarantorsotherobligorsandunderwritersforratingsecuritiesSuchfeesgenerallyvaryfromUS$1000toUS$750000(ortheapplicablecurrencyequivalent)perissueIncertaincasesFitchwillratealloranumberofissuesissuedbyaparticularissuerorinsuredorguaranteedbyaparticularinsurerorguarantorforasingleannualfeeSuchfeesareexpectedtovaryfromUS$10000toUS$1500000(ortheapplicablecurrencyequivalent)TheassignmentpublicationordisseminationofaratingbyFitchshallnotconstituteaconsentbyFitchtouseitsnameasanexpertinconnectionwithanyregistrationstatementfiledundertheUnitedStatessecuritieslawstheFinancialServicesandMarketsActof2000oftheUnitedKingdomorthesecuritieslawsofanyparticularjurisdictionDuetotherelativeefficiencyofelectronicpublishinganddistributionFitchresearchmaybeavailabletoelectronicsubscribersuptothreedaysearlierthantoprintsubscribersForAustraliaNewZealandTaiwanandSouthKoreaonlyFitchAustraliaPtyLtdholdsanAustralianfinancialserviceslicense(AFSlicenseno337123)whichauthorizesittoprovidecreditratingstowholesaleclientsonlyCreditratingsinformationpublishedbyFitchisnotintendedtobeusedbypersonswhoareretailclientswithinthemeaningoftheCorporationsAct2001DC-177
Scott CassieSeniorDirectorHead-NorthAmericanCorporatesIssuerBusinessRelationshipManagementFitchRatings300West57StNewYorkNY10019scottcassiefitchratingscom Tom Muoio ManagingDirectorCorporatesandStructuredCreditBusinessRelationshipManagementFitch Ratings 30 North Colonnade Canary Wharf LondonE145GNUKtommuoiofitchratingscom
Kathleen Fuentes HoltzmanManagingDirectorLatinAmericaFitchRatings300West57thStreetNewYorkNYkathleenholtzmanfitchratingscom
Ng Sing Chan ManagingDirectorHeadofAPACBusinessOriginationFitchRatings1RafflesQuaySingapore048583singchanngfitchratingscom
Contact Us
ALL FITCHCREDITRATINGSARESUBJECTTOCERTAINLIMITATIONSANDDISCLAIMERS PLEASEREADTHESELIMITATIONSANDDISCLAIMERSBY FOLLOWINGTHIS LINKHTTPSWWWFITCHRATINGSCOMSITEDEFINITIONS IN ADDITION RATING DEFINITIONS AND THE TERMSOF USEOF SUCH RATINGS ARE AVAILABLEON THE AGENCYrsquoS PUBLICWEB SITE ATWWWFITCHRATINGSCOMPUBLISHEDRATINGSCRITERIAANDMETHODOLOGIESAREAVAILABLEFROMTHISSITEATALLTIMESFITCHrsquoSCODEOFCONDUCTCONFIDENTIALITYCONFLICTSOFINTERESTAFFILIATEFIREWALLCOMPLIANCEANDOTHERRELEVANTPOLICIESANDPROCEDURESAREALSOAVAILABLEFROMTHECODEOFCONDUCTSECTIONOFTHISSITEFITCHMAYHAVEPROVIDEDANOTHERPERMISSIBLESERVICETOTHERATEDENTITYORITSRELATEDTHIRDPARTIESDETAILSOFTHISSERVICEFORRATINGSFORWHICHTHELEADANALYSTISBASEDINANEU-REGISTEREDENTITYCANBEFOUNDONTHEENTITYSUMMARYPAGEFORTHISISSUERONTHEFITCHWEBSITECopyrightcopy2020byFitchRatingsIncFitchRatingsLtdanditssubsidiaries33WhitehallStreetNYNY10004Telephone1-800-753-4824(212)908-0500Fax(212)480-4435ReproductionorretransmissioninwholeorinpartisprohibitedexceptbypermissionAllrightsreservedInissuingandmaintainingitsratingsandinmakingotherreports(includingforecastinformation)FitchreliesonfactualinformationitreceivesfromissuersandunderwritersandfromothersourcesFitchbelievestobecredibleFitchconductsareasonable investigationofthefactual informationrelieduponby it inaccordancewith itsratingsmethodologyandobtainsreasonableverificationofthatinformationfromindependentsourcestotheextentsuchsourcesareavailableforagivensecurityorinagivenjurisdictionThemannerofFitchrsquosfactualinvestigationandthescopeofthethird-partyverificationitobtainswillvarydependingonthenatureoftheratedsecurityanditsissuertherequirementsandpracticesinthejurisdictioninwhichtheratedsecurityisofferedandsoldandortheissuerislocatedtheavailabilityandnatureofrelevantpublicinformationaccesstothemanagementoftheissueranditsadviserstheavailabilityofpre-existingthird-partyverificationssuchasauditreportsagreed-uponprocedureslettersappraisalsactuarialreportsengineeringreportslegalopinionsandotherreportsprovidedbythirdpartiestheavailabilityofindependentandcompetentthird-partyverificationsourceswithrespecttotheparticularsecurityorintheparticularjurisdictionoftheissuerandavarietyofotherfactorsUsersofFitchrsquosratingsandreportsshouldunderstandthatneitheranenhancedfactualinvestigationnoranythird-partyverificationcanensurethatalloftheinformationFitchreliesoninconnectionwitharatingorareportwillbeaccurateandcompleteUltimatelytheissueranditsadvisersareresponsiblefortheaccuracyoftheinformationtheyprovidetoFitchandtothemarketinofferingdocumentsandotherreportsInissuingitsratingsanditsreportsFitchmustrelyontheworkofexpertsincludingindependentauditorswithrespecttofinancialstatementsandattorneyswithrespecttolegalandtaxmattersFurtherratingsandforecastsoffinancialandotherinformationareinherentlyforward-lookingandembodyassumptionsandpredictionsaboutfutureeventsthatbytheirnaturecannotbeverifiedasfactsAsaresultdespiteanyverificationofcurrentfactsratingsandforecastscanbeaffectedbyfutureeventsorconditionsthatwerenotanticipatedatthetimearatingorforecastwasissuedoraffirmedTheinformationinthisreportisprovidedldquoasisrdquowithoutanyrepresentationorwarrantyofanykindandFitchdoesnotrepresentorwarrantthatthereportoranyofitscontentswillmeetanyoftherequirementsofarecipientofthereportAFitchratingisanopinionastothecreditworthinessofasecurityThisopinionandreportsmadebyFitcharebasedonestablishedcriteriaandmethodologiesthatFitchiscontinuouslyevaluatingandupdatingThereforeratingsandreportsarethecollectiveworkproductofFitchandnoindividualorgroupofindividualsissolelyresponsibleforaratingorareportTheratingdoesnotaddresstheriskoflossduetorisksotherthancreditriskunlesssuchriskisspecificallymentionedFitchisnotengagedintheofferorsaleofanysecurityAllFitchreportshavesharedauthorshipIndividualsidentifiedinaFitchreportwereinvolvedinbutarenotsolelyresponsiblefortheopinionsstatedthereinTheindividualsarenamedforcontactpurposesonlyAreportprovidingaFitchratingisneitheraprospectusnorasubstitutefortheinformationassembledverifiedandpresentedtoinvestorsbytheissueranditsagentsinconnectionwiththesaleofthesecuritiesRatingsmaybechangedorwithdrawnatanytimeforanyreasoninthesolediscretionofFitchFitchdoesnotprovideinvestmentadviceofanysortRatingsarenotarecommendationtobuysellorholdanysecurityRatingsdonotcommentontheadequacyofmarketpricethesuitabilityofanysecurityforaparticularinvestororthetax-exemptnatureortaxabilityofpaymentsmadeinrespecttoanysecurityFitchreceivesfeesfromissuersinsurersguarantorsotherobligorsandunderwritersforratingsecuritiesSuchfeesgenerallyvaryfromUS$1000toUS$750000(ortheapplicablecurrencyequivalent)perissueIncertaincasesFitchwillratealloranumberofissuesissuedbyaparticularissuerorinsuredorguaranteedbyaparticularinsurerorguarantorforasingleannualfeeSuchfeesareexpectedtovaryfromUS$10000toUS$1500000(ortheapplicablecurrencyequivalent)TheassignmentpublicationordisseminationofaratingbyFitchshallnotconstituteaconsentbyFitchtouseitsnameasanexpertinconnectionwithanyregistrationstatementfiledundertheUnitedStatessecuritieslawstheFinancialServicesandMarketsActof2000oftheUnitedKingdomorthesecuritieslawsofanyparticularjurisdictionDuetotherelativeefficiencyofelectronicpublishinganddistributionFitchresearchmaybeavailabletoelectronicsubscribersuptothreedaysearlierthantoprintsubscribersForAustraliaNewZealandTaiwanandSouthKoreaonlyFitchAustraliaPtyLtdholdsanAustralianfinancialserviceslicense(AFSlicenseno337123)whichauthorizesittoprovidecreditratingstowholesaleclientsonlyCreditratingsinformationpublishedbyFitchisnotintendedtobeusedbypersonswhoareretailclientswithinthemeaningoftheCorporationsAct2001DC-177
Scott CassieSeniorDirectorHead-NorthAmericanCorporatesIssuerBusinessRelationshipManagementFitchRatings300West57StNewYorkNY10019scottcassiefitchratingscom Tom Muoio ManagingDirectorCorporatesandStructuredCreditBusinessRelationshipManagementFitch Ratings 30 North Colonnade Canary Wharf LondonE145GNUKtommuoiofitchratingscom
Kathleen Fuentes HoltzmanManagingDirectorLatinAmericaFitchRatings300West57thStreetNewYorkNYkathleenholtzmanfitchratingscom
Ng Sing Chan ManagingDirectorHeadofAPACBusinessOriginationFitchRatings1RafflesQuaySingapore048583singchanngfitchratingscom
