Moody's cuts Magyar notes to Ca

Moody's Investors Service said it downgraded the corporate family rating of Magyar Telecom BV to Ca from Caa3 and the probability of default rating to Ca-PD/LD from Caa3-PD.

Concurrently, Moody's downgraded the €350 million 9½% senior secured notes due 2016 to Ca from Caa3.

The outlook remains negative.

The limited default "/LD" indicator applied to the probability of default rating follows the non-payment of interest on the senior secured notes, at the end of the 30-day grace period from the scheduled interest payment date of June 15.

On July 15 the company announced that it had reached an agreement regarding a proposed debt restructuring with a group of noteholders, representing around 40% of the net outstanding notes of €329 million. Under the proposed restructuring, around €155 million of the notes would be retained or exchanged into new notes bearing interest at 9% (7% of which would be payable in cash, subject to a PIK toggle, and 2% PIK). The remaining €174 million i.e. about 53% of the senior secured notes will be converted into 49% of the pro-forma post-restructuring equity in the group.

Moody's said the downgrade of the corporate family rating and the rating of the notes to Ca reflects the likely expected loss of the current noteholders under the proposed restructuring which would see around 53% of the outstanding amount of the notes exchanged into equity.

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