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Moody’s cuts VodafoneZiggo, debt
Moody's Investors Service said it downgraded VodafoneZiggo Group BV’s corporate family rating to B1 from Ba3 and probability of default rating to B1-PD from Ba3-PD.
At the same time, the agency downgraded the ratings of the group's senior secured debt instruments to B1 from Ba3. Secured debt is issued by Ziggo BV and the SPV borrowing vehicles, Ziggo Secured Finance Partnership and Ziggo Secured Finance BV (indirectly owned by a Dutch Foundation), that on-lend funds to the ring-fenced group below VodafoneZiggo.
The group's unsecured debt instrument ratings were also downgraded to B3 from B2. Unsecured debt is issued by Ziggo Bond Co. BV and the SPV borrowing vehicle, Ziggo Bond Finance BV.
The outlooks are stable.
Moody's said its decision to downgrade VodafoneZiggo's corporate family rating reflects the company's high gross debt/ EBITDA (as adjusted by Moody's) of around 5.9 times (based on the last 12 months ended Sept. 30) and aggressive shareholder returns (of €750 million planned for 2017) at a time when the OCF (Operating cash flow – a company defined measure of EBITDA; estimated at around €1.70 billion for 2017 including €30 million of restructuring expenses) remains under considerable pressure (year-on-year decline of 5.3% expected in 2017).
"The ratings downgrade reflects the group's significant leverage and its operating performance being weaker than our expectations as well as high dividend payments. We do not expect a meaningful improvement in the OCF before 2019/20 due to heavy restructuring charges and the intense competition in the Dutch mobile market," Gunjan Dixit, Moody's vice president, senior credit officer and lead analyst for VodafoneZiggo, said in a news release.
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