Moody's upgrades eircom

Moody's Investors Service said it upgraded eircom Holdings (Ireland) Ltd.'s corporate family rating to B3 from Caa1, its probability of default rating to B3-PD from Caa1-PD, eircom Finco Sarl's €2.3 billion senior secured credit facility to B3 and eircom Finance Ltd.'s €350 million senior secured notes due 2020 to B3. The agency also assigned a provisional B3 rating to the term loan B2, a new tranche of the existing term loan facility. The outlook on all ratings is stable.

"The rating upgrade to B3 reflects our expectation that eircom's operating conditions will improve, primarily as a result of better macroeconomic and competitive environments. In addition, the investments made by the company in its 4G and fiber networks, as well as the cost-cutting efforts, should strengthen eircom's business model, making it more sustainable over the long run," Ivan Palacios, a Moody's vice president and senior credit officer, said in an agency news release.

The B3 corporate family rating reflects eircom's high leverage and slow deleveraging profile, the challenging operating environment where eircom operates, the company's past history of default and restructuring and its improving, but still small, equity cushion, Moody's said.

More positively, the agency said the rating also reflects eircom's strong position in the fixed-line market as Ireland's incumbent operator, the potential for its competitive position to be strengthened over time as a result of its accelerated investment plan, Moody's expectation of positive free cash flow generation once eircom completes the current investment cycle and its adequate liquidity profile.

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