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Switzerland's Sunrise Extends Debt Maturity Dates
Published on:
Fitch Ratings has affirmed Swiss based telco, Sunrise's Long-term Issuer Default Rating (IDR) at 'BB-' with a Stable Outlook.
The affirmation reflects Sunrise's recently announced refinancing of the existing senior secured credit facilities through the issuance of new senior secured fixed and floating rate notes due in 2017. Fitch believes the transaction will have a neutral impact on the company's credit profile, with both free cash flow (FCF) and de-leveraging expected to remain in line with the agency's previous expectations.
The refinancing is also likely to improve Sunrise's financial flexibility by extending the debt maturity profile as well as increasing the amounts available under the senior secured RCF. Fitch has not considered any shareholder-related distribution or acquisitions in its analysis, although the agency notes that the less restrictive covenant structure arising from the repayment of bank debt could lead to a more aggressive financial strategy over the medium term.
The agency remains concerned about the increased competition within the Swiss telecoms industry following Swisscom's more aggressive mobile tariff strategy, which could put pressure on Sunrise's revenues and EBITDA margins. Fitch also believes competitive pressures in the mobile segment could be further exacerbated by a reaction from number-three player Orange, despite its different market positioning towards the high value segment of the mobile market.
Downside pressure on the ratings could be exerted if the company underperformed Fitch's expectations, with failure to reduce leverage below 4.5x on FFO adjusted net basis over the next one to two years as well as FFO interest cover falling below 2.75x. In view of the company's projected leverage profile, an upgrade is unlikely in the near term. However, a decrease in FFO adjusted net leverage at a sustained level well below 4.0x could place upward pressure on the ratings, as well as an increase in FFO interest cover above 4.0x.
The notching differential between the IDR and the senior secured instrument ratings reflects the large amount of outstanding senior secured debt, with gross senior leverage above 3.0x at December 2011. Any upside in the notching of the instrument ratings will be conditional upon Sunrise repaying a material amount of senior debt. Although the refinancing transaction envisages the application of some of the company's available cash in the prepayment of senior secured debt, Fitch considers this not material enough to warrant an increase in the notching differential.
Tags: [sunrise] [Switzerland]
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