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Moody's downgrades Magyar Telecom following payment default

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Moody's Investors Service has downgraded Magyar Telecom's debt ratings and raised the probability of a default after the company missed a 30 day deadline to pay interest on some of its debt liabilities.

On 15 July 2013 the company announced that it had reached an agreement regarding a proposed debt restructuring with a group of noteholders, representing around 40% of the net outstanding notes of EUR329 million. Under the proposed restructuring, around EUR155 million of the notes would be retained or exchanged into new notes bearing interest at 9% (7% of which would be payable in cash, subject to a PIK toggle, and 2% PIK). The remaining EUR174m i.e. about 53% of the senior secured notes will be converted into 49% of the pro-forma post-restructuring equity in the group.

The sponsor, Mid Europe Partners, will also inject some limited funding as equity (and debt) that will allow it to retain 51% of the pro-forma post-restructuring equity in the group.

The downgrade of the CFR and the rating of the notes to Ca reflects the likely expected loss of the current noteholders under the proposed restructuring which would see around 53% of the outstanding amount of the notes exchanged into equity.

The outlook remains negative to reflect the uncertainty over the final shape of the company's capital structure.

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Tags: magyar telecom  Hungary