Moody’s assigned a first-time B1 corporate family rating (CFR) and a B2-PD probability of default rating (PDR) to the Asturias region operator, and a B1 rating and loss given default (LGD) assessment of LGD3 to the company’s €320 million senior facilities agreement. Moody’s said the outlook on its ratings is stable.
Moody’s commended Telecable’s strong position in Asturias, particularly in the pay TV segment, its track record of solid operating performance despite the economic slowdown, the favourable trends in the Spanish telecoms market, the quality of its fully invested network that leads to strong adjusted EBITDA margins of around 50%, its moderate leverage levels, balanced financial policies and adequate liquidity profile.
On the downside, the ratings agency noted possible risks concerning Telecable’s small size and concentration in one region of Spain, the competitive environment where larger integrated operators could accelerate their fibre deployments plans, its high exposure to premium content, which is becoming more expensive, the potential for higher mobile access costs related to its reliance on a MVNO model, the expected use of a large part of cash flow generation for shareholder distributions, and its unhedged exposure to potential interest rate increases.
“The assigned B1 rating balances Telecable’s solid and entrenched market position in its home market, improving trends in the Spanish telecoms market, its financial and operational track record and high-quality network, its moderate leverage, and its prudent financial policies and liquidity against its modest scale because of its concentration in one region of Spain, the potential for increased competition and more expensive content costs, and its limited free cash flow generation after shareholder distributions,” says Iván Palacios, Moody’s vice-president, senior credit officer and lead analyst for Telecable.
“Moody’s rating is a ringing endorsement of Telecable’s current performance and its future prospects. The resulting B1 rating is in line or better than many far larger European cable operators, and in fact represents the highest rating of any European TMT company of its size,” said Eamonn O’Hare, chairman and CEO of Zegona.