Moody’s eyes Telecom Italia for upgrade

Moody's Investors Service said it placed Telecom Italia SpA’s B1 long-term corporate family rating and the B1-PD probability of default on review for upgrade. Concurrently, the agency placed on review for upgrade the B1 ratings on the company’s senior unsecured debt instruments, the B1 ratings on the backed senior unsecured debt instruments issued by its subsidiaries, Telecom Italia Capital SA and Telecom Italia Finance, SA and the (P)B1 senior unsecured euro medium-term note program ratings of Telecom Italia and the backed (P)B1 MTN program ratings of Telecom Italia Finance.

At the same time, Moody's placed on review for upgrade Telecom Italia's B1 senior unsecured revolving credit facility. Previously, the outlook was negative for all entities.

The decision to review Telecom Italia’s ratings follows Sunday’s announcement that the board approved KKR's binding offer for the company's fixed network assets (NetCo), Moody’s said. The binding offer values NetCo at an €18.8 billion enterprise value, although this could be raised to up to €22 billion considering possible upsides associated with earn-outs linked to the occurrence of certain conditions.

The company said that the sale would enable a reduction of Telecom Italia's net debt by about €14 billion and that its reported net debt/EBITDA ratio (after leases) will be less than 2x.

The deal should close by next summer.

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