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Rating Action:

Moody's assigns (P)Ba2 rating to Ziggo's senior secured notes due 2017

21 Oct 2010

London, 21 October 2010 -- Moody's Investors Service has today assigned a provisional (P)Ba2 rating to the senior secured notes due 2017 to be issued by Ziggo Finance B.V. (Ziggo Finance). Ziggo has a Ba3 corporate family rating (CFR), with a stable outlook.

RATINGS RATIONALE

The (P)Ba2 rating on the new notes -- one notch higher than the CFR -- reflects their senior secured position within Ziggo's capital structure ahead of the EUR1.2 billion senior unsecured notes rated B2, due 2018. Should the issue launch size of EUR500 million be changed based on investor demand, this will not impact the ratings provided that the funds are all used to prepay pari-passu senior secured bank debt.

Proceeds from this issuance will be on-lent to the Ziggo group via a new tranche (Facility E) within the existing EUR3.4 billion (EUR2.4 billion outstanding) senior credit facility, which was established in 2006 as part of the formation of the Ziggo group. The rating on the 2017 Notes reflects their pari passu interest over the same security and guarantee package as the senior bank debt. The (P)Ba2 rating on the Notes is based on the assumption that the security package will include amongst other things, security over the network assets. The proceeds will be used to prepay amounts under tranches A, B and C.

Moody's issues provisional instrument ratings in advance of the final sale of securities; these ratings reflect only Moody's preliminary credit opinion regarding the transaction. Upon a conclusive review of the final documentation, Moody's will endeavor to assign a definitive rating to the notes. A definitive rating may differ from a provisional rating, for example if there are material changes to the terms of the notes such as the nature of the security.

The new notes will benefit from incurrence covenants including a 4.25x group senior secured leverage test. Despite entering the group as Facility E of the bank debt, they will not benefit from the existing bank maintenance financial covenants. Although the Notes indirectly rank pari passu with the bank debt following enforcement, control over enforcement processes shared with the banks is subject to certain voting limitations.

The Ba3 CFR continues to reflect (i) Ziggo's leading position in the cable market in the Netherlands; (ii) Ziggo's solid growth prospects over the medium term; (iii) its de-leveraging trajectory; and (iv) positive free cash flow generation. This proposed issuance, following the previous issuance of 2018 notes, will further improve Ziggo's maturity profile. At the same time, the rating reflects (i) the competitive nature of the Dutch cable and telecoms market; and (ii) Ziggo's still-relatively high leverage, at approximately 4.8x Debt to EBITDA (as adjusted by Moody's).

For the nine months through September 2010, Ziggo has reported results that have been in line with Moody's expectations, with a continued successful take up in its "all-in-one" triple-play bundle. This supported the growth in Revenue Generating Units and Average Revenue per User, and hence the total revenues for the group. Moody's understands that the company has maintained strong EBITDA margin well over 50%, in part due to cost management. Moody's notes that Ziggo has revised downward its target guidance for capex in 2010 to EUR190 million (including EUR25 million of integration capex), compared with EUR252 million last year, which will further support free cash flow generation and further de-leveraging. Ziggo now offers high broadband speeds up to 120 Mbps across its entire geographic market, following the completion of its investment in DOCSIS 3.0.

What Could Change the Rating -- Up

Positive pressure on the rating could develop if the company's leverage falls well below 4.5x Debt to EBITDA.

What Could Change the Rating - Down

The ratings could be downgraded if: (i) the leverage increases above 5.5x on a sustained basis; (ii) the company's operating performance weakens substantially which will result in a significant reduction in EBITDA margins; and / or (iii) the company incurs material capital expenditure which could result in negative free cash flow generation.

The principal methodology used in rating this issuer was the Global Cable Television Industry, which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issuer can also be found in the Rating Methodologies sub-directory on Moody's website.

Moody's issues provisional instrument ratings in advance of the final sale of securities; these ratings reflect only Moody's preliminary credit opinion regarding the transaction. Upon a conclusive review of the final documentation, Moody's will endeavor to assign a definitive rating to the notes. A definitive rating may differ from a provisional rating.

Ziggo, with central offices in Utrecht, is the largest cable operator in the Netherlands. In the last twelve months to 30 September 2010, the company reported approximately EUR1.4 billion in revenue and EUR764 million in recurring EBITDA.

REGULATORY DISCLOSURES

Information sources used to prepare the credit rating are the following: parties involved in the ratings, public information, confidential and proprietary Moody's Investors Service's information.

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Please see ratings tab on the issuer/entity page on Moodys.com for the last rating action and the rating history.

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London
Alexis Foret
Analyst
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

London
Chetan Modi
Senior Vice President
Corporate Finance Group
Moody's Investors Service Ltd.
JOURNALISTS: 44 20 7772 5456
SUBSCRIBERS: 44 20 7772 5454

Moody's Investors Service Ltd.
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Moody's assigns (P)Ba2 rating to Ziggo's senior secured notes due 2017
No Related Data.
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