CRIF Ratings affirms Iacobucci HF Aerospace S.p.A.’s ‘CCC’ long term issuer rating; Outlook revised to ‘Stable’

CRIF Ratings (‘Agency’) has affirmed Iacobucci HF Aerospace S.p.A.’s (‘IHFA’ or the ‘Company’) ‘CCC’ long term issuer rating. At the same time, CRIF Ratings has revised the outlook to ‘Stable’ from ‘Evolving’.

The rating affirmation reflects a persisting very aggressive capital structure. More in detail, 2018 preliminary unaudited figures (‘2018p’) highlight performances below CRIF Ratings’ expectations. The persistence of relevant one-off expenses, mostly related to the company reorganization process and the bonds rescheduling, coupled with high interest expenses and taxes, did not allow returning to a positive net result. This led to the deterioration of the capital structure ratios: Net Financial Position/Equity ratio moved up to 7.9x from 7x in the previous fiscal year, whilst Equity/Total sources ratio was equal to 11.3% compared to 12.5% in 2017.

Furthermore, the rating takes into account a still very weak liquidity profile. At the end of 2018p, the financial flexibility is constraint by a scarce amount of unrestricted cash (EUR 0.2m), down compared to EUR 1.2m in 2017, and by almost entirely drawn self-liquidating credit lines. The limited flexibility is confirmed by IHFA’s constant recourse to the deferral of new tax and social security payables. The Company’s refinancing risk continues to be significant, despite the recent rescheduling of the repayment plan for the two bonds that are still outstanding for EUR 10m at the end of 2018: during 2019, the Company has to repay c. EUR 2.2m including principal and interests.

At the same time, EBITDA grew to EUR 5.6m in 2018p (+24.4% y.o.y.), supported by the increase in revenues (EUR 21.4m: +10.1% y.o.y.) and enabled an improvement in leverage and coverage metrics. Despite a slight increase in Net Financial Position ('NFP') to EUR 17m from EUR 16.6m in 2017 (including EUR 6.5m of overdue trade, social securities and tax payables), the net leverage, on an EBITDA basis, moved to 3x from 3.7x while the gross interest coverage, on an EBITDA basis, to 4.4x from 3.6x. The Agency notices that the covenant included in both bonds’ documentation (NFP/EBITDA ≤ 5x) is complied with an adequate headroom.

The ‘Stable’ outlook reflects CRIF Ratings’ expectations about the persisting limited financial flexibility in 2019, consistently with the assigned rating class. The current limited amount of available cash constrains the Company's ability to cope with sudden liquidity needs, potentially jeopardizing the timely debt repayment in case of operating performances below the Agency's expectations. Indeed, the operating performances could be affected by the risk of orders’ postponement, as occurred in the recent years.

CRIF Ratings foresees a gradual growth in the turnover and a profitability in line with 2018p (EBITDA margin of 26.3% in 2018p) over 2019-2020 period, which should allow returning to a positive net result from 2019 onwards. The growth is underpinned by the existing order backlog and by the inclusion in the vendor lists of the main airplanes OEM and airlines. This should lead to a gradual improvement in the capital structure, though the NFP/Equity ratio is forecast to remain still above 5x in 2019.

Company Profile

IHFA, based in Ferentino (FR), operates in the Civil Aviation sector (mainly Commercial and Business Aviation) as a manufacturer and distributor of electrical and mechanical components for aircraft interior fittings. The product lines are divided into three Business Units: (i) GAIN (more than 85% of 2018p turnover), which mainly comprises ‘Espresso and Cappuccino Makers’, ‘Coffee and Tea Makers’, ‘Trash Compactors’, ‘Induction Ovens’; (ii) SEAT, comprising airplanes seats, and NELI, which mainly includes trolleys, for the remaining portion.

The products offering targets almost exclusively a market niche characterized by clients with high budgets. The production is carried out mainly in Italy, while from a commercial perspective the company has also an overseas branch in the US.

In 2018p IHFA reported a turnover of c. EUR 21.4m, most of which coming from outside Europe (US, Asia, North Africa and Middle East), with an EBITDA margin of 26.3%.

IHFA, whose shareholders are Lucio Iacobucci through Filacapital S.r.l. (65.15%) and Idea Capital (34.85%), issued two bonds in 2013 and 2015 for EUR 5m and EUR 7.5m, maturing in June 2020 and December 2022 respectively, following the rescheduling approved by bondholders in March 2018; the rescheduling was  the result of the missed payment of an installment in December 2017 regarding the first bond.

 

For further information, please refer to the Rating Update.

 

Regulatory and legal disclosures

Information to be provided pursuant to Regulation (EC) No. 1060/2009 on Credit Rating Agencies and subsequent amendments

Credit Rating Type

The rating was solicited by the Rated Entity or by a Related Third Party, and so CRIF Ratings received payment for the analysis performed.

Responsibility

CRIF Ratings S.r.l. with registered office at Via M. Fantin 1/3, 40131 Bologna (Italy)

 

Lead Rating Analyst: Davide Tommaso, Associate - Rating Department

Responsible for rating approval: Simone Mirani, Rating Committee Chairperson

Rating history

Date of first issue: 08/11/2013

Date of last update: 11/04/2019

List of rating actions (https://www.crifratings.com/en/rating-list/iacobucci-hf-aerospace/)

Methodology, rating category and historic default rates

Methodological information used for the rating, including the meaning of the each rating category and default definition, is available in the Corporate Rating Methodology document updated on the 12 June 2018 (https://www.crifratings.com/en/methodology/). Information concerning historic default rates and their interpretation can be consulted on the CEREP website (https://cerep.esma.europa.eu/).

CRIF Ratings states that the outlook indicates the most probable direction of the rating over a time period of 12-24 months.

Disclosure of the rating to the Rated Entity prior to publication

Before publication, the Rated Entity was provided with the opportunity to examine the rating and rating drivers, including the main assumptions on which the rating and the outlook are based. The Rated Entity was given at least 24 hours – one full working day - to report any factual errors or appeal against the rating decision, providing additional new information in support of the assessment. The Rated Entity confirmed prior to the expiry of 24 hours – one full working day - that it had not identified any material errors. Therefore, following communication, the rating and the outlook were not modified.

Conflicts of Interest

The rating action issued by CRIF Ratings was performed independently. On the basis of its procedures, CRIF Ratings has not identified any conflicts of interest. The analysts, members of the rating committee involved in the process, CRIF Ratings shareholders and those who are able to exercise a significant influence on the economic activities of the agency do not have any conflicts of interest in relation to the Entity Requester/ Related Third Party and/or Rated Entity. If in the future a potential conflict of interest is identified in relation to the persons reported above, CRIF Ratings will provide the appropriate information and if necessary will withdraw the rating.

Information sources used

2018 unaudited statutory financial statements of the Rated Entity, Rated Entity website, confidential information received from the Rated Entity.

 

CRIF Ratings considers satisfactory the quality of the available information on the Rated Entity. However, CRIF Ratings is not responsible for the accuracy of this information and does not carry out any auditing activities on the information examined.

Services provided to the Requesting Entity by CRIF Ratings, D4V Services and CRIF S.p.A.

The Requesting Entity did not receive, directly and/or through any of its shareholders, subsidiaries or associates, other services from CRIF Ratings and/or from D4V Services and/or from CRIF S.p.A.. The linkage between the Requesting Entity and the relevant shareholders, subsidiaries and/or associates must exceed 20% of direct stake of the share capital.

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Disclaimer

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