Moody's might cut Vodafone

Moody's Investors Service said it placed the A3 senior unsecured and issuer ratings and provisional Baa2 preferred stock shelf ratings of Vodafone Group plc and related rated entities on review for downgrade.

Vodafone's Prime-2 short-term rating was affirmed.

The action follows the announcement that Vodafone intends to acquire Kabel Deutschland Holding AG in a transaction that values Kabel at a total enterprise value of €10.7 billion (£9.1 billion). The transaction is subject to clearance from the European Commission and is expected to close in the fourth quarter of 2013.

"Placing Vodafone on review for downgrade reflects our view that the potential benefits of acquiring KDH could be outweighed by the heightened financial risk implied by the increased debt burden," Ivan Palacios, a Moody's vice president, senior credit officer and lead analyst for Vodafone, said in a news release.

"This is a large transaction for Vodafone, which the company will fund primarily with existing cash resources and debt, resulting in a deterioration in its credit metrics."

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