S&P rates Liberty Costa Rica notes B+

S&P said it rated Liberty Costa Rica Senior Secured Finance’s planned $400 million of sustainability-linked senior secured bonds B+. The agency also gave a B+ rating to Liberty Servicios Fijos LY SA (Liberty Costa Rica). The outlook is stable.

“During the third quarter of 2021, the company completed the acquisition of Telefonica Costa Rica. Liberty Costa Rica financed the purchase through a combination of debt and about $235 million of capital contribution from the direct parent, LBT CT Communications SA. The acquisition will enable Liberty Costa Rica to provide new services, mobile and B2B, which we expect to contribute about 60% to the company's revenue.

“Additionally, we expect that the combination of both businesses (fixed and mobile) will drive significant synergies and efficiencies. We also believe that the company will continue gaining market shares, which are currently about 40% in mobile services and 30% in the cable TV business. As a result, we expect top-line growth to surge 75% (not considering any pro forma adjustments from the merger), with EBITDA margins in the range of 33%-35%,” S&P said in a press release.

The agency said it forecasts Liberty Costa Rica’s adjusted debt to EBITDA ratio to retreat to about 4.4x by the end of 2022 from 7.5x at the end of 2021, to 4x in 2023 and to 3.7x in 2024.

The proceeds will be used to buy 100% participation in a term loan of Liberty Costa Rica. These proceeds, along with another $50 million term loan directly provided by IDB Invest to Liberty Costa Rica, will be used to refinance the latter's debt maturing in 2024 and for other general corporate purposes.

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