S&P downgrades Tele Columbus

Standard & Poor's said it lowered Tele Columbus GmbH's long-term corporate credit ratings to B from B+ and removed the company's ratings from CreditWatch, where they originally placed on Aug. 2. The rating actions follow the group's combination with German competitor Unity Media GmbH (B/positive).

The outlook is positive to reflect the rating on Unity Media, the inherent operating leverage of the group's content business model and the potential for improved cash flow generation and deleveraging at Unity Media in the medium term if the venture is successful.

S&P said the downgrade reflects the increased risk for Tele Columbus as a subsidiary of Unity Media, which is a larger and more indebted entity that is embarking on a challenging new content venture following its acquisition of rights to the German football league, the Bundesliga. The shared ownership, increasing operational integration and likelihood of Tele Columbus being adversely affected in the event of financial stress at Unity Media mean the respective credit quality and ratings of the two entities are being aligned.

The standalone ratings on Tele Columbus reflect the company's high leverage of about 5.6x total debt to EBITDA, modest free cash flow and competitive challenges, which S&P said are mitigated by a mature but predictable contract-driven reselling business model and an adaptable capital structure.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.