Springer SBM One GmbH #B# Rating Affirmed Following Postponement Of Off Watch Outlook Stable

Stocks and Financial Services Press Releases Wednesday May 23, 2018 17:40
LONDON--23 May--S&P Global Ratings

LONDON (S&P Global Ratings) May 23, 2018--S&P Global Ratings said today that it affirmed its 'B' long-term issuer credit rating on Germany-based publisher Springer SBM One GmbH (Springer) and removed the rating from CreditWatch with positive implications, where it was placed on May 3, 2018. The outlook is stable.

At the same time, we affirmed our 'B' issue rating on Springer's senior credit facilities. The recovery rating on the facilities is unchanged at '3', reflecting our expectation of meaningful recovery (50%-70%; rounded estimate 65%) in the event of a default.

Our removal of the ratings from CreditWatch positive follows the announcement that Springer's parent, Springer Nature AG & Co. KGaA, has postponed its IPO on the Frankfurt Stock Exchange due to unfavorable market conditions.

We no longer expect any changes to Springer's capital structure in the near future, and believe that its high leverage and ownership by private equity sponsors will continue to constrain the rating.

The rating reflects Springer's leading position as the largest English content publisher globally, including scientific, technical, and medical books and journals, largely presented in a digital format. The high proportion of recurring subscription sales, with good renewal rates, supports its profitability. These strengths are offset by Springer's exposure to variations in business confidence and economic cycles, mostly through the professional unit (which is mainly represented by business-to-business), as well as exposure to volatile emerging markets in the education business.

The stable outlook reflects our view that over the next 12 months, Springer Nature's EBITDA will continue to gradually increase, but the group's capital structure will remain highly leveraged and adjusted debt to EBITDA (including shareholder loans) will be above 7.5x (about 6.5x-7.0x excluding shareholder loans). The outlook also assumes that the group will maintain adjusted FFO cash interest of 2.0x-2.5x and will further increase its positive free operating cash flow (FOCF).

We could raise the ratings if Springer Nature's adjusted leverage--including shareholder loans--approaches 5x and adjusted FFO to cash interest coverage is maintained at around 2.5x on a sustainable basis, with continuing generation of significantly positive FOCF. An upgrade would also hinge on our perception that the group's financial policy would remain supportive of higher ratings.

We could lower the ratings if Springer Nature underperforms our base-case scenario, resulting in adjusted FFO to cash interest below 2x, or if FOCF turned negative for a prolonged period. We could also take a negative rating action if the group entered into sizable acquisitions leading to credit metrics below our expectations, or if liquidity weakened.

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