Fitch downgrades TalkTalk

Fitch Ratings said it downgraded TalkTalk Telecom Group plc's (TTG) long-term issuer default rating to B- from B and secured debt ratings to B-/RR4 from B/RR4 and placed the IDR on rating watch negative.

“The downgrade of TTG's IDR reflects operational pressures that are driving high leverage, material refinancing risk and our expectation of consistently negative Fitch-defined free cash flow (FCF) over the next three years, which will also impact liquidity headroom. We expect Fitch-defined EBITDA net leverage to remain above 5x until at least the financial year ending February 2025 (FY25) and further drawdowns on the company's revolving credit facility (RCF) to fund operations,” the agency said in a press release.

The RWN reflects ongoing operational execution risks and the possible need to lower leverage and fortify the company's liquidity position ahead of debt refinancing in November 2024 and February 2025. “The company has strategic options that could ease short-term liquidity pressures. However, an operational turnaround plan could take time to show financial improvements,” Fitch said.

The agency said it sees probably resolving the RWN with a rating affirmation and a negative outlook, or a one-notch downgrade.

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