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Moody's places Bulgarian BTC's Ba3 rating on review for downgrade

Author Mario Tanev
Moody's places Bulgarian BTC's Ba3 rating on review for downgrade Author: Vivacom. License: All rights reserved.

SOFIA (Bulgaria), November 12 (SeeNews) - Moody's Investors Service said on Tuesday that it has placed Bulgarian Telecommunications Company's (BTC) Ba3 corporate family rating (CFR) and B1-PD probability of default rating (PDR) on review for downgrade.

The rating action follows the announcement that BTC, which operates under the Vivacom brand, has received a buyout offer for its entire share capital from Dutch-based telecommunications and media company United Group, which is rated lower, the ratings agency said in a statement.

Moody's also said in its statement:

"RATINGS RATIONALE

Because of the debt load that Adria carried ahead of this acquisition (adjusted debt of €1.8 billion, equivalent to 5.7x Moody's adjusted gross debt/EBITDA), and its plan to fund the acquisition of Vivacom with new debt and existing cash, the combined entity would likely have much higher leverage than Vivacom's standalone leverage pre-transaction of 2.4x for the LTM ended June 2019.

Moody's review will focus on Vivacom's capital structure after the refinancing, as well as its financial policy and relationship with its parent Adria. The review will also focus on the potential benefits to Vivacom's business profile resulting from its integration into the Adria group. The review process may be concluded with a multi-notch rating downgrade.

Vivacom's ratings reflect the company's: (1) position as a leading telecoms operator in Bulgaria, with strong market shares in the fixed segment; (2) strong track record of growing its mobile market share and revenue; (3) modest leverage, before the proposed transaction, with Moody's-adjusted gross debt/EBITDA expected to be around 2.3x-2.5x over the next 12-18 months; and, (4) the company's diversified business model, with offers in fixed-line voice, broadband internet, mobile and pay-TV.

WHAT COULD CHANGE THE RATING UP / DOWN

Prior to the review process, Moody's had indicated that the rating could come under positive pressure on evidence that the company would achieve sustained improvements in its debt protection ratios, such as adjusted RCF/gross debt above 30% and gross adjusted debt/EBITDA consistently below 2.5x.

Prior to the review process, Moody's had indicated that downward pressure on the ratings could arise should Vivacom's operating performance weaken, if there were a material deterioration in the company's liquidity profile or should the company incur additional debt, such that (1) its Moody's-adjusted gross leverage remains above 3.0x on a sustained basis; (2) its Moody's-adjusted RCF/gross debt remains below 20% on a sustained basis.

LIST OF AFFECTED RATINGS

On Review for Downgrade:

..Issuer: Bulgarian Telecommunications Company EAD

.... LT Corporate Family Rating, Placed on Review for Downgrade, currently Ba3

.... Probability of Default Rating, Placed on Review for Downgrade, currently B1-PD

Outlook Actions:

..Issuer: Bulgarian Telecommunications Company EAD

....Outlook, Changed To Rating Under Review From Stable"

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