Wind Italy Gets Debt Rating Upgrade
Published on: 5th Dec 2013
By: Ian Mansfield
Standard Poor's Ratings Services has raided the debt ratings at Italy's Wind Telecomunicazioni¬ to 'BB ' from 'B ' . The outlook is stable.
≠S&P said that it based the upgrades primarily on their assessment of Wind as a "strategically important" subsidiary for its Dutch registered parent Vimpelcom. The rating agency assessed Vimpelcom's group credit profile at 'bb', in line with the corporate credit rating on Vimpelcom. They continue to assess Wind's stand-alone credit profile (SACP) at 'b+', reflecting its "satisfactory" business risk profile and "highly leveraged" financial risk profile. The corporate credit rating on a "strategically important" subsidiary is three notches higher than its SACP, but capped at one notch below the group credit profile.
S&P said that it believes that Vimpelcom is unlikely to sell Wind because Wind is an important part of the group's long-term strategy to expand its geographical footprint beyond its primarily emerging-market base. In addition, Vimpelcom's management has previously committed to support Wind. Finally, Wind generates a significant portion of the consolidated group's earnings and its operating performance remains good, which reflects the successful execution of the group's strategy, in S&P's view.
At the same time, the ratings agency believes that a high level of debt at Wind could constrain VimpelCom's ability to provide timely and full support to Wind. Therefore they currently do not assess Wind's status to VimpelCom as higher than "strategically important."
S&P sees limited upside to Wind's SACP over the next 12 months, in view of the company's current meaningful debt burden. They could, however, raise the SACP if Wind's adjusted leverage declined below 5x and free operating cash flow to debt improved toward 5%.