Swiss Travel Retailer Dufry AG Outlook Revised To Stable On Weaker Performance And High Leverage; 'BB' Ratings Affirmed

Research Update: Swiss Travel Retailer Dufry AG Outlook Revised To Stable On Weaker Performance And High Leverage; 'BB' Ratings Affirmed Primary Credit Analyst: Natalia Goncharova, London +44(0)2071763018; natalia.goncharova@standardandpoors.com Secondary Contact: Raam Ratnam, London +442071767462; raam.ratnam@standardandpoors.com Recovery Analyst: Desiree I Menjivar, London 0207 176 7822; desiree.menjivar@standardandpoors.com Table Of Contents Overview Rating Action Rationale Outlook Ratings Score Snapshot Recovery Analysis Related Criteria And Research Ratings List WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MARCH 29, 2016 1

Research Update: Swiss Travel Retailer Dufry AG Outlook Revised To Stable On Weaker Performance And High Overview In 2015, Swiss travel retailer Dufry AG's like-for-like sales declined by 5.3% year-on-year, resulting in lower-than-expected revenues, EBITDA, and cash flows. We are affirming our 'BB' long-term corporate credit and issue ratings on Dufry, including our satisfactory business risk and significant financial risk profiles. We are also revising the outlook on Dufry back to stable from positive due to lower profitability and higher leverage ratios. Our stable outlook reflects our expectation that Dufry's leverage metrics should improve from low 2015 levels on the back of higher cash flow generation and smooth integration of World Duty Free (WDF). Rating Action On March 29, 2016, Standard & Poor's Ratings Services affirmed its 'BB' long-term corporate credit rating on Swiss travel retailer Dufry AG. At the same time, we revised our outlook on Dufry to stable from positive. At the same time, we affirmed our 'BB' issue ratings on the company's existing senior unsecured debt facilities, including a $500 million bond due 2020, a 500 million bond due 2022, a 700 million bond due 2023, and a Swiss franc (CHF) 900 million revolving credit facility (RCF) due 2019. The recovery rating on these instruments is '4', indicating average recovery prospects of 30%-50%. Rationale The downward revision of our outlook follows the release of slightly disappointing full-year 2015 results, which revealed a decline in like-for-like revenues of 5.3% year-on-year. Excluding difficult trading in Brazil and Russia, organic growth reached a positive growth of 4.0% year-on-year, which shows that the remaining businesses are performing very well. On a Standard & Poor's-adjusted basis, the EBITDA margin fell to 10.8% from 12.7% in 2014, which was also slightly short of our expectations. On a company-reported basis, the EBITDA margin came down to 11.8% from 13.7% in WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MARCH 29, 2016 2

2014, despite the realization of synergies from the acquisition of The Nuance Group. Furthermore, due to the delay in the completion of the WDF acquisition, we recognise that debt and leverage metrics for 2015 incorporate the full acquisition debt without the corresponding benefit. As a consequence, we have lowered our projections and no longer anticipate that Dufry will deleverage sufficiently enough to justify an upgrade in fiscal 2016. According to our estimates, Dufry's ratios of funds from operations (FFO) to debt and debt to EBITDA will not be commensurate with our significant financial risk assessment before 2017. Dufry's business risk is supported by the company's position as the world's leading travel retailer. Following the acquisition of competitors The Nuance Group in 2014 and WDF in 2015, Dufry expanded its market share in the airport retail industry to about 25% from about 10% previously. The world's No. 2 travel retailer is LS Travel Retail (Lagardère group) which only has about 8% of the market share. Dufry's large size results in a strong negotiating position with its suppliers. It also better positions the company to compete for new and up-for-renewal concession contracts. The long duration for most of its concessions provides fairly good visibility and implies limited risk of shortfalls in revenues and profits from unexpected concession terminations. Before the WDF acquisition, we already viewed Dufry's geographical mix as well balanced. The acquisition of WDF has further enhanced Dufry's geographical reach, as WDF is particularly strong in the U.K. and Spain. Although we expect deleveraging to occur, we now forecast our core leverage ratios of FFO to debt and debt to EBITDA to remain in our aggressive category in 2016 and to only improve to the significant financial risk category in 2017. We factor in the temporary shortfall in our core ratios by lowering our 'bb+' anchor by one notch using our comparable rating analysis modifier. This also reflects the integration risk from the acquisition of WDF. Our base-case scenario assumes: Real world GDP to rise by about 3.0%-4.0% per year for 2016 and 2017, with the number of international passengers climbing by about 6.0% per year over the same period. Underlying revenue growth rate of about 5.0% per year, supported by passenger growth and a very slight expansion in sales. Revenues to rise by about 30% year-on-year to about CHF8.0 billion in 2016 and to CHF8.3 billion-chf8.4 billion in 2017, helped by the full contribution from WDF. Adjusted EBITDA margin to improve to 11.0%-12.0% in 2016 from 10.8% in 2015, helped by synergies and a reduction in restructuring expenses. EBITDA margin to expand to 12.0%-12.5% in 2017, driven by synergies. Reported operating cash flow post interest expenses and additional working capital needs of CHF650 million-chf750 million per year. Capital expenditures (capex) of CHF250 million-chf300 million per year WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MARCH 29, 2016 3

and dividends of about CHF50 million per year, leaving a discretionary cash flow (DCF) of CHF300 million-chf400 million per year. Based on these assumptions, we arrive at the following adjusted credit measures for 2016 and 2017 on average: FFO to debt of about 18%-22%; Debt to EBITDA of 3.5x-4.2x; and EBITDA interest coverage of 5.0x-6.0x. Liquidity We assess Dufry's liquidity as adequate. Our view is supported by our expectation that sources should be significantly higher than 1.2x liquidity uses over the next 12 months. Our assessment is generally supported by Dufry's sound relationships with banks and its solid standing in credit markets. We estimate headroom under the company's financial covenants of about 15%. We estimate principal liquidity sources over the next 12 months to comprise: Cash and equivalents of about CHF400 million-chf450 million; Undrawn credit lines of more than CHF700 million; and FFO of about CHF700 million. We estimate principal liquidity uses over the same period to comprise: Debt maturities of CHF50 million-chf100 million; Seasonal working capital swing of about CHF50 million; Working capital outflows of less than CHF50 million; Capex of CHF250 million-chf300 million; and Dividend payments of about CHF50 million. Outlook The stable outlook reflects our expectation that Dufry's leverage metrics should improve from low 2015 levels on the back of higher cash flow generation and the smooth integration of WDF. We expect underlying revenue growth to be in the mid- to single-digit area and our adjusted EBITDA to improve slightly. This should result in DCF material enough to deleverage the group into our significant financial risk category by 2017. Upside scenario We could raise our ratings should the company's operations perform better than we anticipate, leading to significant deleveraging of its balance sheet. Specifically, we could raise our ratings should our adjusted FFO-to-debt ratio rise sustainably above 20% and free operating cash flow (FOCF) to debt strongly above 10%. We also expect a smooth integration of WDF with no disruptions of the operational business or unexpected restructuring needs. Downside scenario We could lower our ratings if deleveraging is slower than we currently anticipate, in particular, if FFO to debt remains below 20% and FOCF to debt WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MARCH 29, 2016 4

below 10%. This may be the result of either a slower underlying business, for example, as a result of a general slowdown in air traffic or disruptions during the integration process of WDF. The latter could also involve additional restructuring costs. Although not in our base case, the rating may also be lowered if management embarks on new significant acquistions. We could also revise our outlook should liquidity become less than adequate, primarily because of tightening covenant headroom. Ratings Score Snapshot Corporate Credit Rating: BB/Stable/-- Business risk: Satisfactory Country risk: Intermediate Industry risk: Intermediate Competitive position: Satisfactory Financial risk: Significant Cash flow/leverage: Significant Anchor: bb+ Modifiers Diversification/portfolio effect: Neutral (no impact) Capital structure: Neutral (no impact) Liquidity: Adequate (no impact) Financial policy: Neutral (no impact) Management and governance: Fair (no impact) Comparable rating analysis: Negative (-1 notch) Recovery Analysis Key analytical factors The CHF900 million unsecured RCF due 2019 and the unsecured notes (comprising 800 million unsecured notes due 2023, 500 million unsecured notes due 2022, and $500 million unsecured notes due 2020) have a recovery rating of '4' and an issue rating of 'BB'. The recovery rating is supported by the low amount of prior ranking liabilities, but constrained by the significant quantum of unsecured debt. Our recovery expectations are at the higher half of the 30%-50% range. Our hypothetical default scenario assumes a set of negative regulatory changes and reduced airport travel following a natural disaster or a terrorist event, combined with an economic recession in Europe. We value Dufry as a going concern to reflect its leading market position in duty free shops. Simulated default assumptions Year of default: 2021 EBITDA at emergence: CHF428 million WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MARCH 29, 2016 5

Implied enterprise valuation (EV) multiple: 6.5x Jurisdiction: Switzerland Simplified waterfall Net enterprise value at default (after 7% administrative expenses): CHF2,587 million Priority claims: CHF103 million Unsecured debt claims: CHF5,140 million* Recovery expectation: 30%-50% (higher half of the range) *All debt amounts include six months of prepetition interest and an 85% drawn RCF at default. Related Criteria And Research Related Criteria Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, Dec. 16, 2014 Revised Revolver Usage Assumptions For Recovery Analysis In Corporate Ratings, Nov. 20, 2014 Corporate Methodology: Ratios And Adjustments, Nov. 19, 2013 Industrials: Key Credit Factors For The Retail And Restaurants Industry, Nov. 19, 2013 Group Rating Methodology, Nov. 19, 2013 Corporate Methodology, Nov. 19, 2013 Methodology: Management And Governance Credit Factors For Corporate Entities And Insurers, Nov. 13, 2012 General Criteria: Use Of CreditWatch And Outlooks, Sept. 14, 2009 Recovery: Criteria Guidelines For Recovery Ratings On Global Industrials Issuers' Speculative-Grade Debt, Aug. 10, 2009 Ratings List Ratings Affirmed; CreditWatch/Outlook Action To From Dufry AG Corporate Credit Rating BB/Stable/-- BB/Positive/-- Ratings Affirmed Dufry Finance Senior Unsecured Recovery Rating Dufry International AG Senior Unsecured Recovery Rating BB 4H BB 4H WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MARCH 29, 2016 6

Additional Contact: Industrial Ratings Europe; Corporate_Admin_London@standardandpoors.com Certain terms used in this report, particularly certain adjectives used to express our view on rating relevant factors, have specific meanings ascribed to them in our criteria, and should therefore be read in conjunction with such criteria. Please see Ratings Criteria at www.standardandpoors.com for further information. Complete ratings information is available to subscribers of RatingsDirect at www.globalcreditportal.com and at spcapitaliq.com. All ratings affected by this rating action can be found on Standard & Poor's public Web site at www.standardandpoors.com. Use the Ratings search box located in the left column. Alternatively, call one of the following Standard & Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow 7 (495) 783-4009. WWW.STANDARDANDPOORS.COM/RATINGSDIRECT MARCH 29, 2016 7

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