OREANDA-NEWS. Fitch Ratings says Ascential plc's announcement of its intention to float on the London Stock Exchange is likely to be a positive credit development for debt holders at Ascential Holdings Limited (Ascential). If successful, the IPO could result in sufficient deleveraging at Ascential to support a higher rating, subject to the timing and status of the process. Ascential is currently rated 'B' with a Positive Outlook.

The announcement made on 14 January in an intention-to-float (ITF) statement identifies a target to raise equity proceeds of approximately GBP200m and an initial net debt/ FY2015 EBITDA leverage of approximately 2.5x.

Our primary upgrade guideline is funds from operations (FFO) lease adjusted net leverage of 4.5x. Ascential's reported net debt/EBITDA leverage at end-September 2015 was 4.4x, equating roughly to FFO lease adjusted net leverage of 5.2x. Leverage at the initial post-IPO target is therefore estimated to correlate to FFO net leverage in a range of 3.0 to 3.5x subject to how cash flow items, such as tax and funding costs, are likely to evolve following the IPO and the company's plans to refinance its existing borrowing facilities.

The kind of leverage envisaged by the ITF would provide support for a higher rating; subject to a more thorough understanding of the factors described, long term funding plans and a wider review of ongoing performance.

Fitch will monitor the IPO process, including the formal publication of a listing prospectus and await receipt of documentation / more formal evidence of the new borrowing facilities. More definitive guidance on the rating impact of the IPO will be published as the process evolves and visibility on a successful equity placement becomes clearer.

Any rating action, following a successful IPO, will affect the IDR and instrument ratings on the company's existing debt are likely to be withdrawn given the company's intention to refinance.

Fitch's current rating takes into account the strength of the company's portfolio of events and professional publishing/data analytics businesses (information services); businesses with strong operating margins and positive cash flow dynamics. A portfolio approach to the structure of the business leads to some M&A risk. The exhibitions sector exhibits a degree of cyclicality although cost structures tend to be flexible, while the company remains exposed, albeit to a limited degree, to advertising. Overall advertising revenues (print and digital) accounted for just 9% of 2014 revenues; with management having taken significant steps to reduce exposure to print advertising.