Moody's rates Versatel floaters B2

Moody's Investors Service said it assigned a B1 corporate family rating to Versatel AG and a provisional B2 rating to its €525 million senior secured floating-rate notes due 2014.

The outlook is stable.

The agency said the B1 rating reflects the growth potential of the German broadband market, Versatel's strong DSL market share of around 18% in its network coverage area, its robust business model attributed to its well-balanced exposure to the residential, business and wholesale business segments, its relatively low levels of churn, its valuable high-capacity fiber optic network and city ring infrastructure, the benefits derived from the high level of operating leverage of the business, Versatel's conservative financial strategy and strengthened balance sheet following the company's initial public offering in April, and management's track record in integrating acquisitions and achieving expected synergies.

However, the rating also takes into account Versatel's moderate size; its exposure to the German market, which is increasingly competitive; the lack of a national presence; the fact that a large part of the network is not owned but leased through medium- to long-term lease agreements with infrastructure providers; the technology risks associated with the VDSL network that DT is currently implementing; and some degree of event risk associated with the company's ambitions to continue to expand its footprint through bolt-on acquisitions, Moody's said.

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