Moody’s assigns Baa3 to Bertelsmann notes

Moody's Investors Service said it assigned a Baa3 rating to the proposed euro-denominated junior subordinated notes of benchmark size to be issued by Bertelsmann SE & Co. KGaA.

At the same time, the agency affirmed the senior unsecured ratings and the issuer ratings of Bertelsmann and its rated subsidiary RTL Group SA at Baa1 with a stable outlook, along with the P-2 short-term issuer rating.

"The Baa3 rating we have assigned to the hybrid debt is two notches below Bertelsmann's senior unsecured rating of Baa1, primarily because the instrument is deeply subordinated to other debt in the company's capital structure," Gunjan Dixit, Moody's vice president and lead analyst for Bertelsmann, said in a news release.

The two-notch rating differential reflects the deeply subordinated nature of the hybrid debt. The instruments: (a) have a maturity in 60 years; (b) are senior only to common equity and pari passu with the Genussscheine issued in 1992 and 2001; and (c) provide Bertelsmann with the option to defer coupons on an indefinite, cash cumulative and non-compounding basis, Moody’s said.

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