Fitch Ratings has placed the ratings of Greek mobile operator, WIND Hellas
Telecommunications, on Rating Watch Negative due to liquidity concerns, which
are mainly related to seasonal working capital outflows in H109.
Fitch believes that WIND Hellas's liquidity requirements may peak in H109 due to working capital seasonality, timing of cash interest payments and capital expenditures. This, combined with a negative outlook on operating performance in 2009, caused by the deterioration in the fundamentals of the Greek mobile market and the anticipated effects of cuts in mobile termination rates (MTR), explains the application of the RWN to the company's ratings. Consequently, the loss-making Tellas fixed-line business will be no longer supported to the same capacity by the mobile business in the future.
The reduction in MTR by 2.5 Euro cents from January 2009, and continuing pressure on the prepaid segment ARPUs, due to Greek economic conditions, will place additional downward pressure on operating margins in 2009. The agency understands that the company has a contingency plan in place to scale back capex and operating expenditures for the mobile business and expects the rate of cash burn to halve to EUR40m in 2009 from 2008 due to these actions, and lower cash taxes as a result of the merger with Tellas. However, the company's existing cash balance of EUR37m at YE08 and the undrawn Revolving Credit Facility (RCF) amount of EUR50m will still result in tight liquidity in H109 in Fitch's opinion. The company may be forced to tap most of the RCF during H109 leaving a small margin for error for the remainder of the year.
Fitch also notes the lack of explicit commitment for cash equity support from the parent company but believes that Weather Investments, the parent company, sees WIND Hellas as a strategic asset and remains committed to its Greek operations in the long-term.
Fitch aims to resolve the RWN by or before August 2009 and cautions that any liquidity crunch coupled with a lack of parental support will likely result in a downgrade of at least one notch. The agency estimates that net cash-pay leverage could rise as high as 7-7.5x EBITDA by YE09, and higher-than-expected leverage metrics could also place further negative pressure on the rating.
Posted to the site on 5th March 2009
Posted to: www.cellular-news.com/story/36375.php