May 16 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has assigned Wind Acquisition Finance S.A.'s (WAF) USD 550m senior secured fixed notes due 2020 and Eur 150m senior secured floating notes due 2019 final 'BB' ratings. The instruments' final documentation conforms to information already received by Fitch. The notes are guaranteed by Wind Telecomunicazioni Spa (WIND; 'BB-', Negative).
The new instruments are structured as senior secured obligations of WIND and rank on par with other senior secured obligations of the company including its bank debt and 2018 senior secured notes. Prior to the new issue by WAF, Wind pre-paid 2014 and 2015 maturities of its senior secured bank debt. As a result, the company's debt maturity lengthened while the proportions of secured and unsecured debt in its capital structure did not change.
KEY RATING DRIVERS
- High Leverage
WIND's leverage is high, estimated at around 5x net debt (including payments in kind (PIK))/EBITDA (as calculated by Fitch) at end-2012. Fitch believes the company will be unable to quickly de-lever to below this level. The Negative Outlook reflects that it will be challenging for WIND to stabilise its operating and financial performance on the back of bleak macroeconomic prospects in Italy and even minor additional pressures can compromise deleveraging efforts.
- Parental Support
WIND's ratings continue to benefit from potential support from its sole ultimate shareholder, Vimpelcom Ltd., whose credit profile remains stronger than WIND's. On a standalone basis, WIND's credit profile corresponds to a 'B+' level, which is uplifted by one notch for benign shareholder influence. However, Fitch cautions that Vimpelcom has not committed itself to any level of support. Fitch believes that a further rise in WIND's leverage may diminish Vimpelcom's propensity for providing support to WIND.
- Successful Challenger Operating Profile
WIND's credit profile is supported by its established position as the facilities-based number-three mobile operator in Italy, complemented by an expanding alternative fixed-line/broadband business. WIND has been able to outperform both Telecom Italia SpA ('BBB'/Negative) and Vodafone Group Plc ('A-'/Stable) reporting stronger revenue dynamics and improving its market share at the expense of these two operators.
- No Short-Term Refinancing Risks
Wind does not face any material refinancing risks before 2017 when the bulk of its debt maturities come due.
RATING SENSITIVITIES
A deterioration in leverage beyond 5.5x net debt (including PIK debt)/EBITDA for a sustained period and/or pressures on EBITDA/FCF generation driven by regulation, austerity and competition may lead to a negative rating action. Any evidence of tangible parental support such as equity contribution or debt refinancing via intercompany loans may trigger a positive rating action as would stabilisation of operating and financial performance following three rounds of MTR cuts in 2012 and 2013.