14 Oct 2009 16:43

Moody's changes VimpelCom outlook to stable from negative.

MOSCOW. Oct 14 (Interfax) - Moody's Investors Service has changed the outlook on the Ba2 corporate family and debt ratings of Russian cellular provide VimpelCom to stable from negative, the agency said in a press release.

The stabilization of the outlook reflects primarily VimpelCom's strengthened liquidity profile relative to our earlier concerns (stemming from the company's foreign currency debt obligation exposure to ruble devaluation) supported further by generally stable year-to-date operating performance relative to Moody's earlier expectations.

Moody's notes in particular VimpelCom's successful efforts at refinancing and rebalancing its debt portfolio in favor of local currency-denominated debt instruments over the past six months reducing in the process its exposure to ruble currency volatility as well as the steps taken to improve free cash flow through the re-scaling of its capex program and the restraint shown on the shareholder distribution and investment front in the first nine months of 2009.

Moody's also notes that the relatively benign macroeconomic environment, including the apparent reversal of the previous trend of ruble depreciation, has been favorable for the company's financial metrics, in particular leverage measured as adjusted debt/EBITDA and cash flow coverage in the first six months of 2009. Moreover, the recently announced settlement of the long-standing dispute between its shareholders Alfa and Telenor (A3, stable) effectively remove the questions that had existed over how a resolution might impact the company paving the way for more constructive shareholder interaction over strategic issues in the future.

Moody's previous rating action on VimpelCom was on April 2, 2009 when the rating agency changed the outlook to negative from positive reflecting Moody's concerns over VimpelCom's weaker financial profile which had developed over the course of 2008 as a result of a significant increase in leverage following the acquisition of Golden Telecom and then aggravated by the subsequent ruble devaluation resulting in foreign exchange losses and increased foreign currency debt service costs given the high proportion of foreign currency denominated debt that existed at the time in the company's capital structure.