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Telefonica Debt Ratings Affirmed Thanks to Asset Sales and Refinancing
Published on:
Telefonica has been taken off rating watch for a downgrade by the ratings agency, Standard & Poor's, but the outlook remains negative.
S&P said that the rating affirmation reflects its view that Telefónica's recently accelerated refinancing and asset disposal activity demonstrate the company's willingness and ability to bolster liquidity and keep leverage in check.
As a result, they see Telefónica maintaining for the foreseeable future an adequate liquidity position. This view includes their assumption that the group will be willing and able to complete at least EUR7 billion-EUR8 billion in annual medium-term refinancing or new financing and will generate about EUR1.9 billion in discretionary cash flows after dividends in their forecasts, potentially complemented by other measures such as asset disposals.
S&P now projects overall low-single-digit annual revenue decline and low- to mid-single-digit EBITDA decline in 2013-2014. They see domestic EBITDA dropping by around 10% annually in 2013-2014, but think this would be to a large extent offset by low to mid-single-digit EBITDA growth in Latin America. In the rest of Europe, they foresee an overall decline, but to a much smaller extent than in 2012, which was hit by a sharp margin fall in the UK in particular. UK margins have somewhat recovered since the second quarter of 2012.
S& added that it understands that the management is looking at various options to accelerate debt reduction and support liquidity, including further asset monetization. They have not included further asset disposals at this stage in the base case, but think any such additional measures could help to strengthen liquidity and, to an extent, key credit metrics (after factoring in any impact on dividend leakage and considering effective ownership).
Tags: [telefonica]
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