28th Sep 2018 10:29
LONDON (Alliance News) - Moody's has given a Baa3 rating to Vodafone Group PLC's new hybrid securities, two notches below the telecom company's senior unsecured rating.
Furthermore, back in May, Moody's had placed the telecom giant's ratings on review for downgrade, with that prompted by its acquisition of Liberty Global's operations in Germany, the Czech Republic, Hungary and Romania for an enterprise value of EUR18.40 billion.
The acquisition is due to complete midway through 2019 and is the reason the Vodafone is issuing the hybrid notes.
"The Baa3 ratings we have assigned to the hybrid securities is two notches below Vodafone's senior unsecured rating of Baa1, primarily because the instrument is deeply subordinated to other debt in the company's capital structure," said Moody's Vice President Laura Perez.
The ratings agency assigned the rating to a planned issue of euro-denominated 5 and 6 year non-call capital securities due 2078 and 2079, as well as a GBP-dominated 7-year securities due 2078, and USD-denominated 6-year securities due 2078.
Moody's said that, in its view, these notes have "equity-like features" that invite the Baa3 rating, such as a "50% equity and 50% debt for financial leverage purposes" formulation.
Vodafone's upcoming acquisition of the Liberty Global operations in Europe is likely to deteriorate the UK telecommunications firm's credit metrics, Moody's said, destabilising its "already weakly positioned" Baa1 rating.
"Moody's believes the deterioration in credit metrics more than offsets the strategic benefits and improvements in Vodafone's business profile stemming from the proposed acquisition," said the rating agency.
Shares in Vodafone were down 0.9% at 166.60 pence on Friday.
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