S&P downgrades TDC, rates loan BB-

Standard & Poor's said it lowered TDC A/S's long-term corporate credit rating BB- from BB and the company's €1.969 billion equivalent senior unsecured notes to B from BB following TDC's implementation of its new capital structure following the leveraged buyout by its new 88.2% majority owner, Nordic Telephone Co. ApS.

S&P also assigned a BB- rating with a recovery rating of 2 to the new €7.456 billion senior secured facilities initially borrowed by Nordic Telephone Co. Holding, parent of Nordic Telephone, and subsequently pushed down to TDC.

The B short-term and commercial paper ratings were affirmed. All ratings were removed from CreditWatch with negative implications. The outlook is stable.

S&P said the downgrade primarily reflects TDC's new, highly leveraged capital structure following its LBO by a consortium of investment funds. Pro forma total debt total about €12.9 billion, and lease-adjusted debt to EBITDA is 7.3x. TDC has debt amortizations of about €384 million in 2008 and €617 million in 2009; S&P said it is therefore critical that the group significantly raises its free cash flow generation profile within the next two years.

The ratings are supported by the group's position as the leading operator in the Danish telecoms market, its satisfactory operating performance, good control of the Danish access and broadband markets and meaningful free cash flow generation, the agency said.

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