Telecom Italia is said to have postponed its expected issuance of hybrid debt following a credit rating downgrade and ahead of what has been described as one of Italy’s most important general elections in decades.
The Milan-based telco announced…
Telecom Italia is said to have postponed its expected issuance of hybrid debt following a credit rating downgrade and ahead of what has been described as one of Italy’s most important general elections in decades.
The Milan-based telco announced earlier this month that it would launch a hybrid subordinated debt securities programme of up to €3bn (US$4bn) over an 18 to 24-month period and held an investor roadshow last week. The company was widely anticipated to launch the first of several separate deals following a board meeting on Monday.
A company spokesperson did not confirm the delay, saying indications for the debt securities remain unchanged. The financing forms part of a broader plan to improve the company’s balance sheet that also includes accelerating cost-cutting measures and halving dividends for the next three years.
Dow Jones cited a source close to the company as saying that company officials discussed delaying the issuance because of the general election this weekend, also giving weight to the fact the company is now in exclusive talks with Cairo Communications over the sale of its La7 TV channel.
Ratings agency Moody’s today issued an amended release assigning Telecom Italia’s proposed issuance of capital securities due 2073 a (P)Ba2 long-term rating with a negative outlook.
The provisional rating falls two notches below the telco’s senior-unsecured rating of Baa3. Moody’s said this reflects the fact the hybrid debt is deeply subordinated, is a 60-year instrument, allows the company to defer coupons on a cumulative basis and has no step-up for 10 years and only 100 basis points thereafter.
The agency noted that the proposed issuance aligns with the telco’s recently-announced financial plans, but doubted whether it and the dividend cuts would be enough to fully offset its financial risk.
“Despite Telecom Italia having partially mitigated the effects of a very tough market, the group’s year-end 2012 results reveal a deterioration in its domestic revenues, EBITDA and cash flow generation, as well as a failure to achieve its committed reported net financial position target of EUR27.5 billion,” the agency said. “As a result, Moody’s considers that Telecom Italia’s financial risk has increased.”
