Feb 27 - Fitch Ratings has affirmed Vivendi SA's
(Vivendi) Long-term Issuer Default Rating (IDR) and senior
unsecured rating at 'BBB'. The Outlook on the Long-term IDR is
Stable. The affirmation follows the agency considering the
likely impact on the French market of the entry of a fourth
mobile operator, Iliad.
"Profits at Vivendi's telecoms business in France, SFR, are
going to come under increasing pressure following the entry of
Iliad," says Damien Chew, Senior Director in Fitch's European
Telecoms, Media and Technology team. "This competitive intensity
is likely to persist over the medium term, which is going to
reduce the pace at which Vivendi can de-lever after the planned
acquisition of EMI's recorded music operations."
Vivendi's headroom in its credit profile remains tight,
especially given the significant regulatory and execution risks
associated with the EMI transaction. Fitch believes that the
erosion of SFR's cash flow generation ability could be partly
offset by the continued strong financial performance in other
parts of the group, particularly at GVT.
Fitch has incorporated into its current forecasts that
Vivendi will report 2011 results on 1 March in line with its
stated guidance, close the EMI and TVN transactions in H212 and
complete EUR500m worth of disposals of UMG non-core assets in
Fitch recognises Vivendi's track record in acquisitions and
the financial discipline management has shown in the past.
Vivendi's rating would come under pressure if there is no sign
of deleveraging in 2013, the year after the EMI transaction is
expected to close, and if there was no clear expectation of
medium-term leverage heading back to below 2.5x on Fitch's
structurally adjusted net debt to EBITDA measure.
Fitch's methodology recognises that Vivendi cannot freely
circulate cash between certain of its subsidiaries (especially
Activision Blizzard ) and the agency makes adjustments
to key metrics to reflect the group's structure. To derive
structurally adjusted net debt/EBITDA, the agency strips
subsidiaries' EBITDA and debt from consolidated numbers where
Vivendi does not have direct access to the cash and replaces
EBITDA with dividend streams that Vivendi receives.