S&P puts Bulgaria's BTC ratings on watch negative on planned purchase by United Group

"We expect to resolve the CreditWatch once the transaction closes. We could lower the ratings by multiple notches, most likely to that of United Group, depending on the capital structure of each entity after refinancing, our assessment of Vivacom's strategic importance to United Group, and its financial policy," the ratings agency said in a statement earlier this week.

On November 7, BTC announced that Dutch-based telecommunications and media company United Group has agreed to acquire Vivacom, the largest telco in Bulgaria, for an undisclosed amount.

Standard and Poor's believes that, after the acquisition, Vivacom will be part of a group with a weaker credit quality than Vivacom on a stand-alone basis, although a larger and more diversified telecom operator.

"We expect to lower the rating on Vivacom to that on United Group at closing. This will however depend on the final capital structure at both United Group and Vivacom, our assessment of Vivacom's strategic importance to United Group, and the new owner's financial policy," S&P added.

S&P can also lower the rating of Vivacom if the transaction is abandoned and debt at Vivacom's current parent company is not refinanced on time during the first half of 2020.

BTC's current owner, a consortium led by Bulgarian businessman Spas Roussev and comprising various minority investors, including VTC Capital and Luxembourg-based Viva Telekom, acquired the telecommunications company in a 330 million euro ($365.5 million) deal concluded in August 2016.

Vivacom competes with A1 Bulgaria, a unit of A1 Telekom Austria, and Telenor Bulgaria, a unit of Czech-owned PPF Group.

($ = 0.90292 euro)