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Telecoms Companies' Hybrid Issuance is Credit Positive but Does Not Guarantee Current Ratings
Published on:
While the issuance of hybrid debt by Telecom Italia and Telekom Austria could have some positive credit implications for these companies, hybrid bonds are not a solution to the underlying challenges facing these and other European telecoms service providers, says Moody's Investors Service in a new report on the sector published today.
European telecoms companies are all at differing stages of a down-cycle and hybrid bond issuance generally follows other credit-positive moves like the cancellation of share buybacks and dividends cuts.
However, Moody's says that the issuance of hybrids also shows that some companies have begun to exhaust internal options to protect their financial profile and need to revert to external options, reflecting their limited financial flexibility.
"Other telecoms companies could follow the lead of Telecom Italia and Telekom Austria and, in some instances, hybrid bonds may help strengthen balance sheets, but they won't be enough to protect ratings if there is prolonged weak operating performance," says Carlos Winzer, a Senior Vice President in Moody's Corporate Finance Group and author of the report.
Tags: [telecom italia] [telekom austria]
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