Rating Action: Moody's places ratings of Kabel Deutschland Holding AG (CFR at Ba2) under review direction uncertain
Global Credit Research - 21 Jun 2013
London, 21 June 2013 -- Moody's Investors Service has today placed the Ba2 Corporate Family Rating (CFR) and the Ba2-PD Probability of Default Rating (PDR) of Kabel Deutschland Holding AG ('KDH' or 'the company') as well as the instrument ratings at KDH and its subsidiary Kabel Deutschland Vertrieb&Service GmbH ('KDVS') under review with direction uncertain. This follows the company's announcements that it has received preliminary approaches by both Vodafone Group PLC ('Vodafone', rated A3) and Liberty Global plc ('Liberty Global', CFR at Ba3/Under review for Downgrade) regarding a possible offer for the company.
RATINGS RATIONALE
While the proposals are preliminary and there is no certainty that any offer will ultimately be made, the strong strategic interest both Vodafone and Liberty Global have in KDH increases the likelihood of a firm bid offer in the near term in Moody's opinion.
Moody's would view a successful takeover bid by Vodafone as credit positive for KDH. KDH would be owned by a much larger and significantly higher rated company, which could refinance debt at its more favourable rates, if it so chooses. On the other hand, a take-over by Liberty Global could potentially have more negative credit implications. Liberty has a lower rating compared to KDH and Moody's would expect Liberty Global to manage KDH's finances to its own leverage target of 4.0 to 5.0x gross debt to annualized OCF of the latest quarter as it has done in previous acquisitions.
Moody's continues to acknowledge the solid growth momentum of KDH's cable business, strong operating leverage and good growth potential for its internet, phone and premium TV services. In the nine months ended 31 December 2012 the group's revenues and adjusted EBITDA increased by 8.3% and 9% respectively underpinned by strong demand in the company's internet and phone services.
Moody's anticipates commenting further from time to time as warranted by any material and definitive changes in the bidding process.
The principal methodology used in these ratings was the Global Pay Television - Cable and Direct-to-Home Satellite Operators published in April 2013. Other methodologies used include Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on
Moody's - credit ratings, research, tools and analysis for the global capital markets for a copy of these methodologies.
Kabel Deutschland Holding AG is the largest Level 3 cable TV operator in Germany by customers. In fiscal year 2011/12 ending 31 March 2012, KDH generated EUR 1.7 billion in reported revenues and approximately EUR 795 million in adjusted EBITDA (as reported by the company).