S&P puts Kabel Deutschland on watch

Standard & Poor's said it placed its BB- long-term corporate credit and senior secured bank loan ratings on Kabel Deutschland GmbH on CreditWatch negative following the company's offer Wednesday of a comprehensive remedy package in response to the preliminary decision by the German Federal Cartel office to oppose Kabel Deutschland's plans to merge with three regional cable operators.

S&P also placed the B long-term senior unsecured debt rating on Kabel Deutschland on watch.

"The CreditWatch placement reflects the material changes to the group's original business and financial plans that would be required if the proposed remedy package is to be accepted by the FCO as condition for the merger," said S&P credit analyst Leandro de Torres Zabala.

S&P said Kabel Deutschland's remedy package includes the commitment to the unparalleled and rapid upgrade of internet services to 50% of German homes passed before year-end 2007, which would entail the commitment to significant additional capital expenditure by the company, as well as specific concessions to address complaints of major TV broadcasters and content owners.

Critically, S&P said Kabel Deutschland's ratings factor in a prudent business and capital expenditure strategy under which it is assumed that the company would not undertake any major network upgrade.

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