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Rating Action:

Moody's assigns a definitive Ba2 rating to VEON's bond, upgrades GTH Finance B.V. bonds guaranteed by VEON to Ba2

10 Aug 2017

London, 10 August 2017 -- Moody's Investors Service, ("Moody's") has today assigned a definitive Ba2 senior unsecured rating and LGD4 to the bonds issued by VimpelCom Holdings B.V., a 100% indirectly-owned subsidiary of VEON Ltd. (Ba2 stable), on 16 June 2017. The bonds were provisionally rated by Moody's (P)Ba2 on 30 May 2017.

Moody's has also upgraded the senior unsecured rating on the outstanding bonds of GTH Finance B.V. guaranteed by VimpelCom Holdings B.V. to Ba2 (LGD4) from Ba3 (LGD5).

The action concludes the review for an upgrade of the Ba3 senior unsecured rating of the outstanding bonds of GTH Finance B.V. guaranteed by VimpelCom Holdings B.V. initiated by Moody's on 30 May 2017. For more details please see Moody's press-release at https://www.moodys.com/viewresearchdoc.aspx?docid=PR_367406

The outlook on all ratings is stable.

Moody's acknowledges that the steps completed by VEON to date reflect a significant progress of the group in transitioning to a new predominantly unguaranteed debt/capital structure.

RATINGS RATIONALE

In May 2017 VEON refinanced approximately $1.1 billion worth of subsidiary RUB-denominated bank debt at VimpelCom Holdings B.V. level, and repaid $0.6 billion of subsidiary or subsidiary-guaranteed debt. In June, VEON successfully bought back $1.26 billion, or more than 50% of the bonds targeted during a tender offer (USD-denominated 9.125% Loan Participation Notes issued by VIP Finance Ireland Limited (the 2018 Notes), 7.748% Loan Participation Notes issued by VIP Finance Ireland Limited (the 2021 Notes), and 7.5043% Guaranteed Notes issued by VimpelCom Holdings B.V. (the 2022 Notes), all guaranteed by VimpelCom PJSC. The buy-back was refinanced via a new bonds issue at VimpelCom Holdings B.V. Subsequently, VEON terminated subsidiary VimpelCom PJSC's (issuer rating Ba2 stable) "fall-away" guarantees on the approximately $1.78 billion of bonds issued at the holding level. As a result, guaranteed financial debt was reduced to approximately 22% of the group's financial debt from more than 70% previously (excluding debts at Global Telecom Holding S.A.E. and its subsidiaries, where Moody's maintains separate CFRs).

Further steps, such as prepayment and/or repayment at maturity of other debts within the next 6-7 months will help VEON to reduce subsidiary and subsidiary-guaranteed financial debt to less than 15% of total financial debt of the group (excluding debts at Global Telecom Holding S.A.E. and its subsidiaries).

Moody's expects VEON to complete the transformation of its debt/capital structure by April 2018 and a move to a predominantly unsecured and unguaranteed centralised group-financed model from the previous subsidiary-financed model. VimpelCom Holdings B.V. will act as the main borrower for the VEON group of companies, and manage liquidity within the group by orchestrating distribution of proceeds and managing group's repayments from diversified cash flow sources including dividends, proceeds from the sale of assets and intracompany loans. As a result of the restructuring, debt investors now have a single credit reference and benefit from pari passu credit ranking of the majority of the group's obligations. As part of the process, VEON' currently significant foreign exchange risks associated with debt/cash flow currency mismatch should be reduced.

RATIONALE FOR THE STABLE OUTLOOK

The stable outlook on VEON's ratings reflects Moody's expectation that the company will sustainably maintain its leverage around 3.0x on an adjusted gross-debt basis and trend towards 2.0x on a net-debt basis (unadjusted, consistent with the internal financial policy), and adjusted RCF/Debt above 20%. The agency expects that VEON will maintain a robust liquidity profile and address its refinancing needs in a timely fashion.

WHAT COULD CHANGE THE RATING UP/DOWN

A sustainable reduction in leverage measured by gross debt/EBITDA towards 2.5x and below and strengthening of coverage metrics would exert positive pressure on the ratings, provided that there are no negative developments in the company's operating profile, market positions and liquidity.

Conversely, a material deterioration in VEON's operating and financial profile measured by (1) an increase in leverage measured by gross debt/EBITDA above 3.5x, and (2) a weakening of RCF/debt to below 20% on a sustained basis would put pressure on the ratings. We would assess any material acquisition/shareholder distribution; such actions could exert negative pressure on the ratings.

The principal methodology used in these ratings was Telecommunications Service Providers published in January 2017. Please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.

Headquartered in Amsterdam, the Netherlands, VEON Ltd. (VEON, former VimpelCom Ltd.) is an international telecoms company operating in 13 countries. It consolidates VimpelCom PJSC (Russia), Kyivstar G.S.M. Joint Stock Company (Ukraine), and Global Telecom Holding S.A.E., and operates in Russia, Ukraine, Kazakhstan, Italy, Algeria, Pakistan, and the Commonwealth of Independent States (CIS). VEON operates in Italy via a 50/50 joint venture with CK Hutchison Holdings Limited (A3 stable) - Wind Tre S.p.A. (B1 positive). VimpelCom is 47.9% owned by LetterOne (not rated), 19.7% by Telenor ASA (A3 stable), 8.3% by the Stichting Administratiekantoor Mobile Telecommunications Investor (the "Stichting") and 24.1% is in free float. In the last 12 months to 31 March 2017, VimpelCom generated revenue of $9.1 billion and Moody's-adjusted EBITDA of $3.9 billion.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating.

Julia Pribytkova
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Limited, Russian Branch
7th floor, Four Winds Plaza
21 1st Tverskaya-Yamskaya St.
Moscow 125047
Russia
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Victoria Maisuradze
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

Releasing Office:
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JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454

No Related Data.
© 2021 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved.

CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED BY MOODY’S (COLLECTIVELY, “PUBLICATIONS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. SEE APPLICABLE MOODY’S RATING SYMBOLS AND DEFINITIONS PUBLICATION FOR INFORMATION ON THE TYPES OF CONTRACTUAL FINANCIAL OBLIGATIONS ADDRESSED BY MOODY’S CREDIT RATINGS. CREDIT RATINGS DO NOT ADDRESS ANY OTHER RISK, INCLUDING BUT NOT LIMITED TO: LIQUIDITY RISK, MARKET VALUE RISK, OR PRICE VOLATILITY. CREDIT RATINGS, NON-CREDIT ASSESSMENTS (“ASSESSMENTS”), AND OTHER OPINIONS INCLUDED IN MOODY’S PUBLICATIONS ARE NOT STATEMENTS OF CURRENT OR HISTORICAL FACT. MOODY’S PUBLICATIONS MAY ALSO INCLUDE QUANTITATIVE MODEL-BASED ESTIMATES OF CREDIT RISK AND RELATED OPINIONS OR COMMENTARY PUBLISHED BY MOODY’S ANALYTICS, INC. AND/OR ITS AFFILIATES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT CONSTITUTE OR PROVIDE INVESTMENT OR FINANCIAL ADVICE, AND MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS ARE NOT AND DO NOT PROVIDE RECOMMENDATIONS TO PURCHASE, SELL, OR HOLD PARTICULAR SECURITIES. MOODY’S CREDIT RATINGS, ASSESSMENTS, OTHER OPINIONS AND PUBLICATIONS DO NOT COMMENT ON THE SUITABILITY OF AN INVESTMENT FOR ANY PARTICULAR INVESTOR. MOODY’S ISSUES ITS CREDIT RATINGS, ASSESSMENTS AND OTHER OPINIONS AND PUBLISHES ITS PUBLICATIONS WITH THE EXPECTATION AND UNDERSTANDING THAT EACH INVESTOR WILL, WITH DUE CARE, MAKE ITS OWN STUDY AND EVALUATION OF EACH SECURITY THAT IS UNDER CONSIDERATION FOR PURCHASE, HOLDING, OR SALE.

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Additional terms for Japan only: Moody's Japan K.K. (“MJKK”) is a wholly-owned credit rating agency subsidiary of Moody's Group Japan G.K., which is wholly-owned by Moody’s Overseas Holdings Inc., a wholly-owned subsidiary of MCO. Moody’s SF Japan K.K. (“MSFJ”) is a wholly-owned credit rating agency subsidiary of MJKK. MSFJ is not a Nationally Recognized Statistical Rating Organization (“NRSRO”). Therefore, credit ratings assigned by MSFJ are Non-NRSRO Credit Ratings. Non-NRSRO Credit Ratings are assigned by an entity that is not a NRSRO and, consequently, the rated obligation will not qualify for certain types of treatment under U.S. laws. MJKK and MSFJ are credit rating agencies registered with the Japan Financial Services Agency and their registration numbers are FSA Commissioner (Ratings) No. 2 and 3 respectively.

MJKK or MSFJ (as applicable) hereby disclose that most issuers of debt securities (including corporate and municipal bonds, debentures, notes and commercial paper) and preferred stock rated by MJKK or MSFJ (as applicable) have, prior to assignment of any credit rating, agreed to pay to MJKK or MSFJ (as applicable) for credit ratings opinions and services rendered by it fees ranging from JPY125,000 to approximately JPY550,000,000.

MJKK and MSFJ also maintain policies and procedures to address Japanese regulatory requirements.

​

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