Fitch: Wind's Refinancing Credit Positive but Limited Rating Upside

Mon Mar 24, 2014 10:43am EDT

(The following statement was released by the rating agency) LONDON, March 24 (Fitch) Fitch Ratings says that the announced plans to refinance a significant portion of Wind Telecomunicazioni SpA's (Wind; BB-/Negative) debt and an expected EUR500m new cash injection from parent Vimpelcom are credit positive but do not immediately trigger a rating upgrade. Refinancing is expected to bring in tangible interest savings and somewhat improve free cash flow. Further upside could result from Wind's potential tower disposals contemplated with the overall amendment request. However, the impact of these disposals on Wind's adjusted leverage profile is likely to be marginally positive due to incremental lease expenses. Likewise, parental support is already reflected in Fitch's ratings while the amount of the new cash injection is insufficient to propel Wind to a higher rating level - e.g. cash contribution is only roughly equal to slightly below 0.3x of Wind's EBITDA. A positive impact of a planned refinancing is that it would remove the uncertainty over a potential financial burden associated with the PIK instrument. Although this instrument is technically not recourse to the ring-fenced Wind group, we have always assumed that the company would have to be involved in servicing PIK loans issued at the level of its immediate parent. If approved, the refinancing would also materially improve the liquidity profile of the company with limited debt amortisations due in the medium-term. Whilst Wind's Issuer Default Rating (IDR) already takes into account one-notch of support from Vimpelcom, the new proposed cash injection is unlikely to result in an increase in the notching from the standalone rating (B+) due to its limited size relative to the group's financial debt obligations (i.e. approx. EUR10.3bn equivalent). However, Fitch notes the transaction could impact the instruments' ratings depending on the agency's assessment of recovery rates across the various debt classes in accordance with its criteria on "Recovery Ratings and Notching Criteria for Non-Financial Corporate Issuers" available at www.fitchratings.com. Vimpelcom has recently announced that its subsidiary Wind is holding discussions with lenders over the potential refinancing of its capital structure. The transaction could envisage the refinancing of the senior notes issued by Wind Acquisition Finance, the repayment of payment-in-kind notes issued by Wind Acquisition Holdings Finance with new debt instruments issued within the restricted group and is likely to include a cash injection of up to EUR500m by Vimpelcom. Wind has submitted an amendment request to its senior lenders and senior secured noteholders in order to finalise the transaction. The request includes the solicitation of consent to a two-year extension of the senior debt maturities. Contact: Giovanni Reichenbach Associate Director +44 20 3530 1255 Fitch Ratings Limited 30 North Colonnade London E14 5GN Nikolai Lukashevich, CFA Senior Director +7 495 956 9968 Media Relations: Peter Fitzpatrick, London, Tel: +44 20 3530 1103, Email: peter.fitzpatrick@fitchratings.com. Additional information is available at www.fitchratings.com. ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE.

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