To estimate the S&P-adjusted debt-to-EBITDA ratio for Bouygues for the fiscal year ended December 31, 2022, we follow the workflow outlined. ### Step 1: Identify the Relevant Industry Bouygues is a diversified industrial group with major activities in Construction (Colas, Bouygues Construction), Media (TF1), and Telecommunications (Bouygues Telecom). It also has interests in real estate development. * **Regulated Utilities:** Bouygues Telecom operates in the telecommunications sector, which is not a regulated utility in the sense of natural monopolies like water or electricity distribution with cost-of-service regulation. The other segments are construction and media, which are competitive. Thus, the Regulated Utilities methodology does not apply. * **Oil And Gas Exploration And Production:** Bouygues is not an E&P company. * **Unregulated Power And Gas:** Bouygues is not primarily a power or gas generator/supplier. * **Transportation Infrastructure:** While Bouygues Construction builds infrastructure, it does not primarily operate transportation infrastructure assets (like toll roads or airports) as its core business model for rating purposes in the same way a dedicated infrastructure fund or operator would. Since Bouygues is a diversified conglomerate and does not fit neatly into the specific specialized industry methodologies provided (which are for Utilities, E&P, Unregulated Power/Gas, and Transportation Infrastructure), we apply the **general corporate baseline formulas** as instructed for entities not fitting the provided industry methodologies. Note: In practice, S&P might rate Bouygues under "General Corporate" or specific sector criteria for Construction/Media/Telecom, but lacking those specific texts, we use the baseline provided in the prompt's instructions. ### Step 2: Estimate Adjusted Debt The baseline formula is: `Adjusted_Debt = (reported_debt + leases + pension_deficit + guarantees + hybrid_debt_portion + other_debt_like_items) - eligible_cash` From the provided facts for the period ending 2023-01-01 (which corresponds to the balance sheet date for the 2022 fiscal year): 1. **Reported Debt:** * `Longterm Borrowings`: 11,586,000,000 EUR * `Current Borrowings And Current Portion Of Noncurrent Borrowings`: 1,361,000,000 EUR * `Current Overdrafts And Short Term Borrowings From Banks`: 418,000,000 EUR * Total Reported Interest-Bearing Debt = 11,586 + 1,361 + 418 = 13,365,000,000 EUR 2. **Leases:** * `Noncurrent Lease Liabilities`: 2,107,000,000 EUR * `Current Lease Liabilities`: 498,000,000 EUR * Total Lease Liabilities = 2,107 + 498 = 2,605,000,000 EUR 3. **Other Debt-like Items:** * The prompt does not provide explicit values for pension deficits, guarantees, or hybrid debt. We assume these are zero or negligible based on the provided data points. `Other Current Financial Liabilities` (13M) and `Other Noncurrent Financial Assets` are typically not added to debt unless specified as debt-like. We will stick to the explicit debt and lease liabilities. 4. **Eligible Cash:** * `Cash And Cash Equivalents`: 5,736,000,000 EUR * S&P generally deducts unrestricted cash and cash equivalents. There is no information suggesting restrictions. * Note: The report provides a `Net Debt` figure of 7,440,000,000 EUR for 2023-01-01. Let's verify: Total Debt (13,365) + Leases (2,605) = 15,970. Net Debt usually refers to Interest Bearing Debt minus Cash. 13,365 - 5,736 = 7,629. The reported Net Debt is 7,440. The difference might be due to other financial assets/liabilities or specific definitions. However, for S&P Adjusted Debt, we typically add back leases to Net Debt or calculate Gross Debt + Leases - Cash. * Let's calculate Adjusted Debt explicitly: * Gross Interest Bearing Debt = 13,365,000,000 EUR * Plus Lease Liabilities = 2,605,000,000 EUR * Less Cash and Cash Equivalents = 5,736,000,000 EUR * Adjusted Debt = 13,365 + 2,605 - 5,736 = 10,234,000,000 EUR. *Alternative Check:* If we use the reported `Net Debt` of 7,440,000,000 EUR, this usually equals (Interest Bearing Debt - Cash). To get S&P Adjusted Debt, we add Lease Liabilities to Net Debt. Adjusted Debt = Reported Net Debt + Total Lease Liabilities Adjusted Debt = 7,440,000,000 + 2,605,000,000 = 10,045,000,000 EUR. The discrepancy between 10,234 and 10,045 comes from the definition of Net Debt in the report vs our manual sum. The report's Net Debt (7,440) implies their "Debt" component was 13,176 (7,440 + 5,736). Our sum of interest-bearing debt items was 13,365. The difference is 189M. This could be due to `Other Current Financial Liabilities` or `Hedging Instrument Liabilities` or `Other Noncurrent Financial Assets` netting. Given `Net Debt` is a specific line item provided, it is safer to use the provided `Net Debt` figure as the base for interest-bearing net debt, then add leases which are explicitly separated in S&P methodology (operating leases are capitalized and added to debt). So, **Adjusted Debt** = 7,440,000,000 (Net Debt) + 2,605,000,000 (Leases) = **10,045,000,000 EUR**. ### Step 3: Estimate Adjusted EBITDA The baseline formula is: `Adjusted_EBITDA = EBITDA (reported or reconstructed) + adjustment_leases (if any) + nonrecurring_losses - nonrecurring_gains ± pension_adjustments ± joint_venture_proportional_EBITDA ± other_normalization_adjustments` First, we need to reconstruct EBITDA from the Income Statement data for the period 2022-01-01 to 2023-01-01. **Reconstructing EBITDA:** EBITDA can be calculated as: `Profit Loss From Operating Activities` + `Depreciation And Amortisation Expense` + `Impairment Losses` (if not included in D&A line, but usually D&A includes amortization and depreciation, while impairments are separate). From the data: * `Profit Loss From Operating Activities`: 1,872,000,000 EUR * `Depreciation And Amortisation Expense`: 2,228,000,000 EUR * `Impairment Loss Reversal Of Impairment Loss Recognised In Profit Or Loss And Provision Expense`: 172,000,000 EUR. (Note: This is an expense/loss figure. If it's a net expense, it reduces operating profit. To get to EBITDA, we add back D&A. Do we add back impairments? Standard EBITDA often adds back impairments. S&P Adjusted EBITDA typically adds back non-recurring impairments. Let's look at the nature. It says "Impairment Loss ... And Provision Expense". This suggests it's a net charge. We should add it back to Operating Profit to get a pre-impairment, pre-D&A figure, or check if Operating Profit is after these items. Usually, "Profit Loss From Operating Activities" is after D&A and Impairments. * So, EBITDA (Reported) = Operating Profit + D&A + Impairments/Provisions (if considered non-cash/adjustment). * However, standard EBITDA is Earnings Before Interest, Taxes, Depreciation, and Amortization. It does *not* automatically exclude impairments unless specified as "Adjusted". S&P *Adjusted* EBITDA usually adds back non-recurring items. * Let's calculate a standard EBITDA first: EBITDA = 1,872 + 2,228 = 4,100,000,000 EUR. (Assuming Impairments are included in Operating Profit and are non-cash, strictly speaking EBITDA doesn't add them back, but Adjusted EBITDA might. Let's look for "Recurring" metrics). The report provides `Profit Loss From Operating Activities Recurring`: 1,962,000,000 EUR. It also provides `Depreciation Rightofuse Assets`: 446,000,000 EUR. This is likely part of the total D&A. Let's use the Recurring Operating Profit as a base for "Adjusted" performance, as it excludes non-recurring items. `Profit Loss From Operating Activities Recurring` = 1,962,000,000 EUR. Now add back Depreciation and Amortization. Total `Depreciation And Amortisation Expense` = 2,228,000,000 EUR. Is the D&A figure associated with the Recurring Profit? Usually, D&A is a recurring operational cost. So, Recurring EBITDA = Recurring Operating Profit + D&A. Recurring EBITDA = 1,962 + 2,228 = 4,190,000,000 EUR. **Lease Adjustment:** Under S&P methodology (prior to IFRS 16/ASC 842 full integration or for comparability), an adjustment is often made to EBITDA to add back the interest portion of lease expenses and the depreciation of right-of-use assets, effectively treating leases as debt. However, since we have already added Lease Liabilities to Debt, we must ensure we don't double count or undercount. Standard S&P Adjustment for Leases in EBITDA: When leases are capitalized (as they are in IFRS 16), the `Depreciation And Amortisation Expense` includes depreciation of Right-of-Use (ROU) assets, and `Interest Expense` includes interest on lease liabilities. Reported EBITDA (under IFRS 16) is: Operating Profit + D&A. Operating Profit is after ROU Depreciation. So, Reported EBITDA = EBIT + D&A. S&P often calculates "Pre-IFRS 16" EBITDA or makes an adjustment to reflect the "rent" expense. The adjustment is typically: Add back Interest on Lease Liabilities and Add back Depreciation on ROU assets? No. Let's look at the standard S&P formula for Adjusted EBITDA when leases are treated as debt: Adjusted EBITDA = Reported EBITDA + Interest Expense on Leases. Why? Because Reported EBITDA (IFRS 16) has deducted ROU Depreciation (non-cash-ish, but included in D&A add-back) but *not* Interest on Leases (which is below EBIT). Wait. Let's trace the P&L: Revenue - OpEx (excluding D&A) - D&A (includes ROU Dep) = EBIT (Operating Profit) EBITDA = EBIT + D&A. This EBITDA figure *includes* the benefit of not deducting interest, but it *has* added back the ROU depreciation. In the pre-IFRS 16 world, Rent Expense was in OpEx. EBITDA was after Rent. To make them comparable, S&P adds back the "Interest" component of the lease cost to EBITDA? Actually, the common S&P adjustment is: Adjusted EBITDA = Reported EBITDA + Interest Expense on Lease Liabilities. Let's verify this logic. Pre-IFRS 16: EBITDA = EBIT + D&A. Rent is in EBIT. So EBITDA is after Rent. Post-IFRS 16: EBITDA = EBIT + D&A. EBIT is after ROU Dep. Interest is below EBIT. So EBITDA is after ROU Dep (added back) but before Interest. The cash cost of a lease is roughly Principal + Interest. In IFRS 16 EBITDA, we have added back ROU Dep (which approximates Principal amortization in straight-line? No, ROU Dep is straight line, Principal amortization is accelerating). S&P's standard adjustment for leases when calculating leverage ratios (Debt/EBITDA) where Debt includes Lease Liabilities: They often define Adjusted EBITDA as: Reported EBITDA + Interest Expense on Lease Liabilities. Let's find the `Interest Expense On Lease Liabilities` in the data: `Interest Expense On Lease Liabilities`: 62,000,000 EUR. So, Adjusted EBITDA = Recurring EBITDA + Interest on Leases. Recurring EBITDA = 4,190,000,000 EUR. Adjustment = 62,000,000 EUR. Adjusted EBITDA = 4,190 + 62 = 4,252,000,000 EUR. *Self-Correction/Refinement:* Did we use the right Operating Profit? `Profit Loss From Operating Activities Recurring` is 1,962,000,000. `Profit Loss From Operating Activities` is 1,872,000,000. The difference is 90,000,000 (Non-recurring items: 93 income - 183 expense = -90 net). Using Recurring is appropriate for "Adjusted" metrics. Did we use the right D&A? `Depreciation And Amortisation Expense` is 2,228,000,000. This figure likely includes the `Depreciation Rightofuse Assets` of 446,000,000. So, Recurring EBITDA = 1,962 + 2,228 = 4,190. Add Lease Interest: 62. Adjusted EBITDA = 4,252,000,000 EUR. Are there other adjustments? `Share Of Profit Loss Of Associates And Joint Ventures`: -30,000,000. S&P often adds back the proportionate EBITDA of joint ventures if they are equity accounted, or simply uses the dividend received? No, standard S&P methodology for equity affiliates: If the affiliate is consolidated, it's in EBITDA. If equity accounted, the share of profit is below Operating Profit (usually). Here, `Share Of Profit Loss Of Associates...` is listed below Operating Profit. To get a true group EBITDA, we should add back the share of profit/loss of equity affiliates if we want to reflect the underlying cash generation, but typically S&P does *not* add back equity income to EBITDA unless it's a specific industry practice (like Oil & Gas). For general corporates, equity income is excluded from EBITDA. However, if we are calculating "Adjusted EBITDA" for leverage, we usually stick to the consolidated operating EBITDA. The share of loss is -30M. This reduced Net Income but did not affect Operating Profit. So it's not in our EBITDA calculation. We do not add it back to EBITDA because it wasn't deducted to arrive at EBITDA. (EBITDA is pre-interest, pre-tax, pre-equity income). So no adjustment needed here for the EBITDA numerator itself, unless we are doing a "Look-through" EBITDA. Standard S&P General Corporate does not typically look through equity affiliates for EBITDA unless they are material and the methodology specifies. Given the lack of specific industry instruction, we stick to the consolidated operating EBITDA. What about `Other Income Recurring` and `Other Expense By Nature Recurring`? These are likely included in the `Profit Loss From Operating Activities Recurring`. Revenue (44,322 + 76) - Expenses = Operating Profit. The line `Profit Loss From Operating Activities Recurring` is the bottom line of the operating section. So adding D&A to this figure is correct. **Final Adjusted EBITDA Calculation:** Recurring Operating Profit: 1,962,000,000 + Depreciation & Amortization: 2,228,000,000 = Recurring EBITDA: 4,190,000,000 + Interest on Lease Liabilities: 62,000,000 = Adjusted EBITDA: 4,252,000,000 EUR ### Step 4: Calculate the Ratio Adjusted Debt = 10,045,000,000 EUR Adjusted EBITDA = 4,252,000,000 EUR Ratio = 10,045 / 4,252 Calculation: 10,045 / 4,252 ≈ 2.3624 Rounding to two decimal places: 2.36 2.36