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America Movil Under Review for Ratings Downgrade on KPN Takeover Bid

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The debt ratings agency, Moody's has put Am rica M vil on review for a possible ratings downgrade following its EUR 7.2 billion (USD9.16 billion) takeover bid for KPN.

The transaction is subject to approval from the Netherlands Authority for the Financial Markets and closing is not expected until Q4 of 2013.

"Placing América Móvil's ratings on review for downgrade reflects our view that the potential benefits of controlling KPN could be outweighed by the heightened operational challenges and financial debt burden resulting from a successful completion of this transaction ," says Soummo Mukheree, a Moody's Vice President -- Senior Credit Officer and lead analyst for América Móvil. "This is a sizeable transaction for América Móvil, which if funded with debt, clearly puts its leverage, as measured by Total Debt to Adjusted EBITDA above our 1.5 times threshold for the A2 rating category", added Mukherjee.

Moody's estimates that pro forma for the acquisition, América Móvil's adjusted debt/EBITDA could increase to as high as 2.5x, a level which Moody's feels could result in a downgrade by more than one notch. However, if the company expects to maintain leverage between 1.7 -- 2.2x, a downgrade by more than one-notch is highly unlikely. The leverage calculation, however, does not include the potential sale of E-Plus to Telefonica Deutschland as it is still subject to shareholder approval.

The review process will focus on the final outcome of América Movil's intended public offer as it relates to the ultimate ownership and capital structure and how the transaction, if closed, will be financed. The review will also take into consideration America Movil's plans for KPN's debt as well as the expected deleveraging post transaction. Finally, the review will also take into consideration the potential for further similar acquisitions in other European markets. Moody's notes that if the transaction is completed as planned, América Movil's rating could be downgraded by up to one notch.

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