Moody’s adds LD to Tele Columbus rating

Moody's Investors Service said it appended the limited default (/LD) designation to Tele Columbus AG's Caa3-PD probability of default rating, changing it to Caa3-PD/LD from Caa3-PD, to reflect a limited default after the company missed the payment of the backed senior secured notes coupon that was due on Nov. 2, and the 30-day grace period expired.

Tele Columbus' long-term corporate family rating is unaffected at Caa3, and so is its Caa3 rating on the company's backed senior secured debt instrument and senior secured bank credit facility ratings.

On Nov. 22, the company signed a lock-up agreement with most of its lenders to defer payment and forbear any enforcement action related to the skipped payment until Dec. 30. Tele Columbus plans to follow a U.K. scheme of arrangement to execute its planned amend and extend pact.

The deal calls for an equity contribution of €300 million by its largest indirect shareholder, Morgan Stanley Infrastructure Partners of which €97 million have already been provided, extending its outstanding €462 million term loan A at par due October 2024 and its €650 million of backed senior secured notes due May 2025to October 2028, increased pricing of the debt instruments, with a fully PIK coupon for the notes and PIK interest for the loan (except a minimum of 50 basis points of cash pay), and changes in the financial covenants, including changes to debt baskets and introduction of minimum liquidity covenants.

“If the transaction is completed as proposed, Moody's will likely view the A&E transaction as a distressed exchange, which constitutes an event of default under Moody's definitions. A distressed exchange is defined as an offer by an issuer to creditors of a new or restructured debt, or a new package of securities, cash or assets, that amount to a diminished financial obligation relative to the original obligation, with the effect of the transaction being the avoidance of an eventual payment default on the debt,” the agency said in a press release.

The outlook remains negative.

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