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Rating Action:

Moody's assigns provisional (P)B1 senior unsecured rating to the new notes issued by GTH Finance B.V. and guaranteed by VimpelCom

12 Apr 2016

London, 12 April 2016 -- Moody's Investors Service has today assigned a provisional (P)B1 senior unsecured rating and a Loss Given Default assessment of LGD5 to new proposed notes of approximately $1.0 billion issued by GTH Finance B.V., partly owned by VimpelCom group, an international telecommunications company. The outlook is stable.

"We have assigned (P)B1 ratings to GTH Finance B.V.'s new notes to reflect VimpelCom's guarantee and the structural subordination of the notes to senior group's debt, guaranteed by its main Russia-based operating subsidiary VimpelCom PJSC which we rate at Ba3", says Julia Pribytkova, a Moody's Vice President - Senior Analyst.

GTH Finance B.V. will issue the notes with the sole purpose of on-lending the proceeds to its parent company Global Telecom Holding S.A.E. (GTH, unrated) incorporated in Egypt. GTH is 51.9% indirectly owned by VimpelCom Ltd (Ba3 stable), via its subsidiary VimpelCom Holdings B.V., which acts as guarantor for the new notes.

The proceeds of the notes will be utilised for (1) the repayment of an intra-company loan to VimpelCom; and (2) other corporate purposes.

RATINGS RATIONALE

The new notes' (P)B1 rating, which is one notch below VimpelCom Ltd's corporate family rating, reflects their structural subordination to approximately 70% of the group's debt (totalling $7.2 billion, including $5.5 billion of outstanding rated notes), which is directly guaranteed by the Russian operating subsidiary VimpelCom PJSC.

The notes will be issued for the term of up to seven years, and will rank pari passu with other existing and future indebtedness of VimpelCom holding structures. The notes will be structurally subordinated to all obligations of VimpelCom's direct or indirect operating subsidiaries (or guaranteed by them). The investors will benefit from certain non-financial covenants including a negative pledge and restrictions on mergers and reorganisations.

VimpelCom's financial profile is largely shaped by its Russian and Ukrainian subsidiaries, which provide the bulk of the cash flows available to the group. However, Moody's expects GTH, which holds a 46.5% stake at Omnium Telecom Algeria S.p.A. (unrated), and fully owns Pakistan Mobile Communications Limited (B1 stable) and Banglalink Digital Communications Limited (Ba3 stable) to contribute up to 40% to the group's total dividend income by 2019.

VimpelCom's Ba3 rating reflects (1) the company's position as the third-largest operator in Russia with 57 million subscribers, sharing a leadership position in the country's largest metropolitan market, Moscow, with its closest peer Mobile Telesystems PJSC (MTS, Ba1 under review for downgrade); and (2) the company's solid liquidity and balanced debt maturity profile.

Moody's positions VimpelCom's rating lower than those of its Russian peers MTS and Megafon PJSC (Ba1 under review for downgrade), to reflect its (1) higher leverage; (2) weaker profitability and financial metrics, in particular debt coverage; (3) elevated foreign-currency risk, with more than 70% of the company's debt denominated in foreign currencies, and 80% of revenues in highly volatile Russian roubles and Ukrainian hryvnias (although this is partially mitigated by a meaningful cash cushion denominated predominantly in US dollars); (4) exposure to technological risks associated with the substantial investment required to maintain competitiveness on the Russian mobile data market; and (5) a track record of sizeable debt-funded M&A activity.

RATIONALE FOR STABLE OUTLOOK

The outlook on the ratings is stable and reflect adequate positioning of the group's rating, given that its major operating subsidiaries are exposed to the deteriorating economic environment and country risks of Russia and Ukraine.

WHAT COULD CHANGE THE RATING UP/DOWN

There would be upward pressure on VimpelCom's ratings if (1) the group demonstrated sustainable and meaningful diversification of the cash flows available to the group; (2) the group's debt/EBITDA were to decline below 2.0x (Moody's-adjusted) on a sustainable basis; and (3) the market position and liquidity of the key Russian operations remained solid. Evolution towards a more diversified cash flow mix and dividend base would positively affect the group's rating.

Conversely, the ratings could come under pressure if: (1) VimpelCom's debt/EBITDA were to rise above 3.0x (Moody's-adjusted) on a sustained basis, or (2) VimpelCom's operating profile, market position or liquidity were to deteriorate materially as a result of adverse market developments and/or material transactions negatively affecting the group's financial flexibility.

The principal methodology used in this rating was Global Telecommunications Industry published in December 2010. Please see the Ratings Methodologies page on www.moodys.com for a copy of this methodology.

Headquartered in Amsterdam, the Netherlands, VimpelCom Ltd (VimpelCom) is an international telecommunications company operating in 14 countries. It is a holding company for VimpelCom PJSC (Russia and CIS), Kyivstar G.S.M. Joint Stock Company (Ukraine, rating withdrawn), and Global Telecom Holding S.A.E. The company owns 50% in a joint venture in Italy with CK Hutchison Holdings Limited (A3 stable).

VimpelCom is 40.8% owned by LetterOne (not rated), 43.0% by Telenor ASA (A3 stable), 7.1% by Stichting Administratiekantoor Mobile Telecommunications Investor and 9.1% is in free float. In 2015, VimpelCom reported revenue of $9.6 billion and EBITDA of $2.86 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
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David G. Staples
MD - Corporate Finance
Corporate Finance Group
Telephone: 00971 4237 9536

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Moody's assigns provisional (P)B1 senior unsecured rating to the new notes issued by GTH Finance B.V. and guaranteed by VimpelCom
No Related Data.
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