Vodafone rating threatened by Kabel M&A

Michael Carroll
28 Jun 2013

Credit ratings agency Moody’s Investors Services is considering downgrading Vodafone stock, following the carrier’s move to acquire German cableco Kabel Deutschland.

Moody’s is reviewing the cellco’s A3 senior unsecured and issuer ratings, and its (P)Baa2 preferred stock shelf ratings on concerns the benefits of the acquisition could be outweighed by an increase in Vodafone’s debt. The agency estimates Vodafone’s adjusted debt/EBITDA will increase 0.6 times, which will take the cellco over the 3.25 times level Moody’s has set for downgrading its A3 rating.

“This is a large transaction for Vodafone, which the company will fund primarily with existing cash resources and debt, resulting in a deterioration in its credit metrics,” explains Iván Palacios, a Moody's vice president, senior credit officer and lead analyst for Vodafone.

Vodafone is set to become Germany’s largest cable company, after wooing the board of Kabel Deutschland with an offer of €87 per share. The acquisition is likely to be completed in 4Q13.

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