The rating on Merlin reflects Standard&Poor's Ratings Services' view of the group's highly leveraged financial position, weak debt service coverage measures, relatively high capital expenditure (capex), and significant operating lease liabilities. The rating also reflects Merlin's heavily seasonal business and exposure to challenging discretionary consumer spending trends. These risks are partially offset by Merlin's geographically diverse attractions portfolio, growing proportion of revenues from all-year sites, strong earnings track record, positive unadjusted free operating cash flows, and industry-leading margins. In addition, the rating reflects the equity support committed by largest shareholder KIRKBI A/S (not rated), which now owns 36.3% of Merlin, to fund specific expansion projects. We view Merlin's business profile as compatible with a 'BB' category business score.
