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I AGREE
24 Jan 2011
Madrid, January 24, 2011 -- Moody's Investors Service has today 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 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.
RATINGS RATIONALE
"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 Mr Winzer.
On 17 January 2011, VimpelCom called a shareholders meeting for
17 March 2011 to consider whether to issue VimpelCom Ltd common shares
and convertible preferred shares to the shareholders of Wind. Telenor's
three nominees on the VimpelCom board voted against the approval of the
acquisition because they do not believe it makes strategic or financial
sense for VimpelCom and will harm the company's shareholders.
The other six members of the VimpelCom board, including all three
independent directors and the three Altimo -- nominated directors,
voted to approve the transaction.
Under the terms of the revised transaction approved by the VimpelCom Ltd
supervisory board, VimpelCom Ltd would own 51.7% of
Orascom Telecom and 100% of Wind Telecomunicazioni S.p.A.
(Wind Italy) in exchange for a cash consideration of USD1.5 billion
and a 20% economic interest and a 30.6% voting interest
in the enlarged VimpelCom group. VimpelCom Ltd would finance this
with VimpelCom's existing cash and new debt. A number of
assets will be demerged after the transaction has closed. These
include (i) Wind's 35% stake in ECMS (Egypt); (ii) its
75% stake in Koryolink (North Korea); (iii) some of Orascom
Telecom's sub-sea cable and internet portal assets,
including the Libero internet portal; (iv) Wind International Services;
and (v) one of Wind Italy's sub-sea cable operations.
The companies expect the transaction to be completed during the first
half of 2011, and the demerger of Orascom Telecom and Wind Italy
assets at or shortly after the closing date of the combination between
VimpelCom and Wind.
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.
The principal methodology used in this rating was the Global Telecommunications
Industry published in December 2010.
Headquartered in Moscow, Russia, VimpelCom OJSC is a leading
Russian telecommunications operator, providing voice and data services
through a range of wireless, fixed and broadband technologies.
VimpelCom is the third-largest mobile operator in Russia,
a leading operator in Kazakhstan and has a presence in Ukraine,
Uzbekistan, Tajikistan, Armenia, Kyrgyzstan and Georgia.
In 2009, the company launched operations in Vietnam and Cambodia.
Following the acquisition of the leading Russian altnet, Golden
Telecom, in early 2008, VimpelCom became one of Russia's
largest integrated nationwide telecommunications providers. In
2009, VimpelCom OJSC generated approximately USD8.7 billion
in revenues and USD4.3 billion in reported EBITDA.
REGULATORY DISCLOSURES
Information sources used to prepare the credit rating are the following:
parties involved in the ratings and confidential and proprietary Moody's
Investors Service information.
Moody's Investors Service considers the quality of information available
on the issuer or obligation satisfactory for the purposes of assigning
a credit rating.
The rating has been disclosed to the rated entity or its designated agents
and issued with no amendment resulting from that disclosure.
Moody's Investors Service may have provided Ancillary or Other Permissible
Service(s) to the rated entity or its related third parties within the
three years preceding the Credit Rating Action. Please see the
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Moody's adopts all necessary measures so that the information it uses
in assigning a credit rating is of sufficient quality and from sources
Moody's considers to be reliable including, when appropriate,
independent third-party sources. However, Moody's
is not an auditor and cannot in every instance independently verify or
validate information received in the rating process.
Please see ratings tab on the issuer/entity page on Moodys.com
for the last rating action and the rating history.
The date on which some Credit Ratings were first released goes back to
a time before Moody's Investors Service's Credit Ratings were fully digitized
and accurate data may not be available. Consequently, Moody's
Investors Service provides a date that it believes is the most reliable
and accurate based on the information that is available to it.
Please see the ratings disclosure page on our website www.moodys.com
for further information.
Please see the Credit Policy page on Moodys.com for the methodologies
used in determining ratings, further information on the meaning
of each rating category and the definition of default and recovery.
Madrid
Carlos Winzer
Senior Vice President
Corporate Finance Group
Moody's Investors Service Espana, S.A.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
London
Paloma San Valentin
MD - Corporate Finance
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's Investors Service Espana, S.A.
Barbara de Braganza, 2
Madrid 28004
Spain
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454
Moody's assigns (P) Ba2 rating to VimpelCom's proposed new notes; ratings on review for possible downgrade (Russia)
No Related Data.
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