Moody rates VimpelCom's proposed new notes (P) Ba2 rating to
MOSCOW. Jan 25 (Interfax) - Moody's Investors Service has assigned a provisional (P) Ba2 rating to the loan participation notes of VIP Finance Ireland Limited, an orphan SPV, created for the sole purpose of issuing notes and on-lending proceeds to open joint-stock company Vimpel-Communications OJSC (VimpelCom), the agency said in a press release.
The rating is on review for possible downgrade, in line with all other ratings of VimpelCom, which have been on review for possible downgrade since 5 October 2010. The amount and maturity of the notes are subject to the prevailing market conditions during placement. In the absence of a guarantee from the beneficiary of the proceeds of the notes, credit recourse is provided by the underlying loan agreement with VimpelCom. The loan evidencing the on-lending of the proceeds from the new notes will rank pari passu with all the existing senior unsecured obligations of VimpelCom. This rating assumes that any future debt issuance by VimpelCom or Vimpelcom Ltd (owner of VimpelCom) will be undertaken on a senior unsecured basis and will rank pari passu. Any future senior unsecured debt instruments to be issued are expected to be rated at the same rating level as existing rated debt.
Net proceeds from the new notes offering will be used primarily to re-finance VimpelCom's existing debt and for other corporate purposes, which may include (i) funding a portion of the cash consideration to be paid in connection with VimpelCom Ltd.'s acquisition of Weather Investments (recently renamed Wind Telecom, hereinafter Wind), or (ii) following the closing of the acquisition of Wind, refinancing by direct or indirect intercompany loan a portion of the indebtedness associated with Wind's indirect subsidiary Orascom Telecom Holding S.A.E. and related parties. The distribution of all or a portion of the net proceeds of the loan to VimpelCom Ltd. or one of its wholly owned subsidiaries and any subsequent refinancing as well as its terms depends upon the closing of the acquisition of Wind, which is subject to the satisfaction of certain conditions precedent.
Moody's issues provisional ratings in advance of the final sale of securities and these ratings reflect the rating agency's preliminary credit opinion regarding the transaction only. Upon a conclusive review of the final documentation, Moody's will endeavour to assign a definitive rating to the notes. A definitive rating may differ from a provisional rating.
"Today's rating action is embedded in the ongoing rating review process that was initiated in response to the announcement of the intention of a merger between VimpelCom Ltd. and Wind (not rated) to create the world's sixth-largest mobile telecoms company in terms of number of subscribers," says Carlos Winzer, a Moody's Senior Vice President and lead analyst for VimpelCom. "However, there is currently uncertainty as to whether the merger will go ahead, given that one of the main shareholders (Telenor -- rated A3, stable -- which currently holds a 36% voting interest and 39.6% economic interest in VimpelCom Ltd) opposes the deal on the grounds of conflicting interest and disagreements on the asset valuation," adds Winzer.
VimpelCom's ratings remain on review as the rating agency continues to focus on (i) the extent to which the numerous benefits of the deal for the company will offset the potentially higher business risk associated with some of Wind's assets; and (ii) the financial implications for VimpelCom of the funding and future cash flow needs within the group structure. The merger will be positive for VimpelCom in that it will (i) enhance the scale and scope of the company's combined operations; (ii) give the company a broader international footprint; and (iii) enable it to achieve potential synergies and de-leveraging. Moreover, Moody's also notes that the transaction is priced at relatively moderate multiple compared with recent industry deals.
Moody's previous rating action on VimpelCom was implemented on 5 October 2010, when the rating agency placed the ratings of Vimpelcom on review for possible downgrade.