S&P cuts NLI credit outlook to stable from positive
- -S&P cuts NTL Inc.'s subordinated debt rating to CCC+
- -S&P cuts debt ratings of several NTL Inc. subsidiaries
London, July 20 (BridgeNews) - Credit rating agency Standard & Poor's
issued the following comment Friday:
Standard & Poor's today affirmed its single-'B'-plus corporate credit
ratings on NTL Inc. and its rated subsidiaries, including NTL Communications
Corp. The senior secured debt ratings on NTL's rated subsidiaries were also
affirmed. NTL provides business and consumer telephony, Internet access, and
residential cable television, primarily in the U.K. and Ireland. At the same
time, Standard & Poor's lowered its senior unsecured debt ratings on NTL Inc.'s
rated group companies to single-'B'-minus from single-'B'. The outlooks on NTL
Inc.'s ratings and those of its rated subsidiaries were revised to stable from
positive.
* * *
See list below for all rating actions.
The outlook revisions reflect NTL's financial underperformance relative to
Standard & Poor's expectations and the material weakening in NTL's financial
flexibility over the past 12 months. Specifically, capital market sentiment
toward NTL has weakened, thereby reducing NTL's access to capital. This is
important because, in Standard & Poor's opinion, NTL is not fully funded beyond
the medium-term and faces substantial refinancing risk.
In addition, it is Standard & Poor's analytical judgment that France
Telecom (A-/Negative/A-2), which has invested $7.8 billion in NTL's common and
preferred stock, now has less flexibility to finance any further potential
investment in NTL, given the material weakening in its own credit profile over
the past 12 months.
NTL is considered to have a very aggressive financial profile and a
relatively weak business position. This is a reflection, in part, of NTL's
relatively early stage of development and the strong business positions and
greater financial strength and flexibility of NTL's main competitors in the
U.K. pay-TV and telephony markets. The group therefore will continue to face
substantial operational and financial challenges.
In a period of substantial growth and, following a three-year period in
which NTL has spent about $20 billion acquiring 10 companies, NTL's key
operational challenges include the successful integration of acquired companies
so that the group can offer high and consistent network and service quality
across its cable operations. NTL must also grow the average revenue and average
gross margin per home connected by successfully selling new products such as
digital TV, interactive services, and high-speed Internet connection services.
At March 31, 2001, NTL had consolidated debt outstanding of about $15.1
billion and redeemable preferred stock outstanding of about $2.1 billion. Given
the group's current cash flow profile, Standard & Poor's considers that NTL's
consolidated net debt will increase by at least a further GBP2.7 billion ($3.8
billion). NTL generated EBITDA of $105.0 million in Q1 2001, and a net loss of
$1.04 billion. NTL announced that it generated EBITDA of GBP115.0 million in Q2
2001, and expects to generate EBITDA (before corporate expenses) of GBP485
million for 2001 with EBITDA (before corporate expenses) expected to increase
to more than GBP825 million in 2002.
Given the weakness of NTL's capital structure relative to its cash
earnings, NTL's margin for any execution errors or delays is negligible. It
will be a considerable challenge for the group to generate sufficient cash to
cover its annual cash interest and capital expenditure payments, which Standard
& Poor's estimates will run at more than GBP2.0 billion per year. Clearly, the
challenge for the group to generate sufficient cash flow to repay debt will be
greater still. As a consequence, Standard & Poor's considers NTL's refinancing
risk to be high, albeit that the group's debt maturity profile is relatively
long-ended. NTL's senior unsecured bonds begin to mature from 2004.
The lowering of the senior unsecured debt ratings on NTL and its
subsidiaries is based primarily on a reassessment of the company's asset value
relative to the amount of structurally senior debt and other operating company
liabilities. The asset reassessment reflects the marked reduction in the market
value of NTL's assets. NTL's market capitalization has fallen by 88% over the
past 12 months to $2.01 billion, at market close on July 19, 2001.
OUTLOOK: STABLE
The expectation that NTL's debt levels will continue to increase and that
the group's cash flow credit protection measures will continue to be relatively
weak over the medium-term, limits the potential for medium-term ratings
improvement. Furthermore, NTL's ratings and outlook assume that the company
will proceed in line with the business plan presented to Standard & Poor's.
Any material deviation from plan could put pressure on NTL's ratings, Standard
& Poor's said.
RATINGS AFFIRMED, OUTLOOK REVISED TO STABLE
Ratings
To From
NTL Inc.
Corporate credit ratings B+/Stable/- - B+/Positive/- -
NTL Communications Corp.
Corporate credit ratings B+/Stable/- - B+/Positive/- -
Diamond Cable Communications PLC
Corporate credit ratings B+/Stable/- - B+/Positive/- -
NTL Triangle Ltd.
Corporate credit ratings B+/Stable/- - B+/Positive/- -
NTL Technologies Ltd.
Corporate credit rating B+/Stable/- - B+/Positive/- -
Cablecom (Ostschweiz) AG
Corporate credit rating B+/Stable/- - B+/Positive/- -
RATINGS AFFIRMED
NTL Technologies Ltd.
Senior secured debt BB-
NTL Communications Ltd.
Senior secured debt* BB-
Cablecom (Ostschweiz) AG
Senior secured debt B+
RATINGS LOWERED
NTL Inc.
Subordinated debt CCC+ B-
NTL Communications Corp.
Senior unsecured B- B
Subordinated debt CCC+ B-
Preferred stock CCC CCC+
Diamond Cable Communications PLC
Senior unsecured debt B- B
Diamond Holdings PLC
Senior unsecured debt(4) B- B
NTL Triangle Ltd.
Senior unsecured debt B- B
*Guaranteed by NTL Communications Corp.
(4)Guaranteed by Diamond Cable Communications PLC |
