Moody's might upgrade Polkomtel

Moody's Investors Service said it placed under review for upgrade the B1 corporate family rating and the B1-PD probability of default rating for Eileme 1 AB (publ), an intermediate holding company that indirectly owns 100% of Polkomtel Sp zoo.

The agency also placed under review for upgrade the Caa1 rating on Eileme 1's $201 million of payment-in-kind notes due 2020 and the B3 rating on the €542.5 million and $500 million of senior subordinated notes due in 2020 issued by Eileme 2 AB (publ).

The review follows the company's announcement that Cyfrowy Polsat SA has entered into a conditional investment agreement to acquire, in an all-share transaction, at least 83.8% of Metelem Holding Co. Ltd., the ultimate parent of Polkomtel. The transaction is conditional on, among other things, a refinancing of Polsat's debt. As part of the refinancing, Polsat will raise additional funding of around PLN 1 billion to pay down Eileme 1's PIK notes.

The agency said the review reflects the expected improvement in the company's credit profile as a result of this transaction. The risk profile of the combined entity will be stronger than that of Polkomtel alone, Moody's said, and the repayment of the PIK notes will allow Polkomtel to accelerate reduction in group leverage.

The B1 rating reflects Polkomtel's leading position in the Polish mobile market, its track record of generating solid profitability and the better growth prospects of the Polish market within the broader European context, Moody's said.

The rating also reflects Polkomtel's mobile-centric business model, the challenging competitive environment in Poland, the group's exposure to foreign currency fluctuations and the complexity of the group's structure, Moody's said.

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