S&P: RCS& RDS will need additional refinancing

Standard & Poor’s has affirmed its ‘B’ long-term corporate credit rating on Romania-headquartered quadruple-play telecommunications and pay-TV services provider RCS & RDS. “We removed the rating from CreditWatch, where it was placed with positive implications on February 5, 2010. The outlook is stable,” commented the agency.

It also withdrew the ‘B+’ debt rating on the firm’s proposed USD 200 million senior unsecured bond, as issuance has not taken place. “In our view, RCS & RDS’s liquidity is still weak despite the successful arrangement of a USD 100 million bank facility due 2013,” it added. “This is because the maturity profile of the company’s debt becomes quite steep when balanced against its free cash flow generation profile; in particular, about USD 375 million is to be repaid in 2012,” said Standard & Poor’s credit analyst Michael O’Brien. “Our current view of the company’s positive free cash flow generation profile and existing liquidity sources indicates that a portion of additional refinancing will be necessary to make the 2012 repayments, absent any exceptional emergency reduction of network investments to preserve liquidity.” RCS & RDS generated USD 24.7 million in positive free operating cash flow (FOCF) in 2009. “We anticipate that this will improve significantly over the next two years, on the back of EBITDA growth and lower capital expenditures following earlier network investments,” said O’Brien.

Otilia Haraga

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