Moody's might upgrade ONO

Moody's Investors Service said it placed under review for upgrade Grupo Corporativo ONO SA's B2 corporate family rating and B2-PD probability of default rating as well as the instrument ratings at Nara Cable Funding Ltd. and Nara Cable Funding II Ltd., two special-purpose vehicles that have on-lent the funds from the issuance of senior secured notes due 2018 and 2020 to ONO, and ONO Finance II plc, the issuer of senior notes due 2019.

This follows the announcement that Vodafone Group plc (A3) has agreed to acquire ONO for €7.2 billion.

Moody's would view a successful acquisition by Vodafone as credit positive for ONO. The agency said ONO would be owned by a much larger and significantly higher rated company, which could refinance debt at its more favorable rates if it so chooses. The potential in-market combination with Vodafone's Spanish activities should also allow for cost synergies, Moody's said.

The agency noted that ONO continues to face a fiercely competitive operating environment and challenging (although slightly improving) macroeconomic conditions in Spain, which had a negative impact on the company's recent operating performance.

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