# Analysis of Moody's Adjusted Leverage Trend for Bouygues 2022

## Key Metrics Calculation

### Net Debt
- 2023-01-01: €7,440 million
- 2022-01-01: €941 million
- **Change: +€6,499 million increase (590% deterioration)**

### EBITDA Proxy (Operating Profit + D&A)
- 2022: €1,872M (Operating Profit) + €2,228M (D&A) + €446M (ROU Depreciation) = **€4,546 million**
- 2021: €1,733M + €2,065M + €353M = €4,151 million

### Net Leverage Ratio (Net Debt / EBITDA)
- End of 2021: €941M / €4,151M = **0.23x**
- End of 2022: €7,440M / €4,546M = **1.64x**
- **Deterioration: +1.41x**

## Root Cause Analysis

The dramatic increase in net debt is driven by:
1. **Major M&A Activity**: Cash flows used in obtaining control of subsidiaries increased from €382M (2021) to €6,269M (2022)
2. **Increased Borrowings**: Long-term borrowings jumped from €5,805M to €11,586M (+99%)
3. **Partial Cash Offset**: Cash declined from €6,501M to €5,736M (-€765M), partially mitigating the debt increase
4. **Financing Cash Flows**: Net positive €4,853M from financing activities in 2022 to support acquisitions

## Moody's Perspective

Moody's adjusted leverage focuses on:
- **Gross Leverage**: Net Debt/EBITDA worsened from 0.23x to 1.64x
- **Debt Capacity**: Nearly doubled leverage ratio indicates materially reduced financial flexibility
- **Acquisition Integration Risk**: Significant M&A increases execution and refinancing risks
- **Growth Offset**: While revenues grew 18% and EBITDA grew 10%, debt increased far faster

The leverage metrics clearly show **deterioration** despite operational growth. The company significantly increased financial risk through aggressive M&A financing.

<answer>Deteriorating</answer>