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April 18 (Reuters) - (The following statement was released by the rating agency)
Fitch Ratings has assigned Wind Acquisition Finance S.A.'s proposed seniorsecured fixed and floating notes to be guaranteed by Wind Telecomunicazioni Spa (WIND; BB-, Negative) an expected 'BB(EXP)' rating.
The new instruments are structured as senior secured obligations of WIND and will rank on par with other senior secured obligations of the company including its bank debt and 2018 senior secured notes. The proceeds will be lent by Wind Acquisition Finance S.A. to WIND. Fitch understands that in conjunction with this transaction, WIND is planning to pre-pay 2014 and 2015 maturities of its senior secured bank debt. As a result, the company's debt maturity will lengthen while the proportions of secured and unsecured debt in its capital structure will not change.
Wind is planning to place EUR500m equivalent of new euro-denominated floating rate senior secured notes due 2019 and new USD-denominated fixed rate senior secured notes due 2020. The security package and covenants are the same as for the outstanding senior secured notes.
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. The company successfully placed a EUR500m 2018 senior secured notes tap issue in Q112, which helped it refinance EUR250m of 2012 bank amortising facilities and repay a EUR500m bridge spectrum facility (EUR250m of which was fully repaid with cash on the balance sheet in September 2012).
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 two rounds of MTR cuts in 2012 and 2013.
