Moody's rates new Telenet Group notes Caa2

Moody's Investors Service said it assigned a prospective B2 senior implied rating to Telenet Group Holding NV, assigned a prospective Caa2 rating to Telenet's proposed €245 million (in US dollar equivalents) due 2014 and affirmed the prospective B3 rating for the €500 million senior notes (upsized from €400 million) due 2013 of Telenet's wholly-owned subsidiary, Telenet Communications NV.

The outlook is stable.

Moody's said the ratings reflect Telenet's high debt leverage levels and continued high capital expenditure expectations, refinancing risk associated with the company's sizeable bank debt amortization requirements beginning in 2007; and strong ongoing competition from the larger and more established incumbent Belgian telecommunications operator, Belgacom NV (Aa3 senior unsecured rating).

The ratings also reflect risks associated with operating in a highly regulated business environment; the lack of ownership of the overall network for about one third of the company's subscriber base; a degree of integration risk relating to completed and pending acquisitions and ongoing event risk relating to potential future acquisitions; and structural considerations relating to the company's consolidated capital structure.

Moody's said the ratings positively reflect the stable subscriber trends and the overall utility-like characteristics of analog cable TV in Belgium; the upgraded nature of the company's owned and leased networks, which allows for the provision of new services (broadband Internet and telephony) and allows for future capital expenditures to be more success-based; the company's strong historical growth trends for revenue, EBITDA, and new service subscribers; and the strong brand recognition and low churn rates for Telenet's products.

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