S&P rates Tiscali loans B, B+

Standard & Poor's said it assigned a B long-term corporate credit rating to Tiscali SpA and a B long-term debt rating to the €50 million senior secured term loan taken on by financing vehicle Tiscali U.K. Holdings Ltd.

The agency also assigned a B+ long-term debt rating to Tiscali U.K. Holdings Ltd.'s €50 million senior secured revolving credit facility.

The corporate credit rating was placed on CreditWatch with positive implications, reflecting the fact that S&P expects to raise it to B+ after completion of Tiscali's announced €150 million rights issue in February.

According to S&P, ratings are constrained by the group's negative free cash flow generation and high financial leverage primarily from the acquisition in September of Pipex Communications plc for £210 million.

Ratings are also limited by Tiscali's fairly modest business scale and by its continuing investment phase in its two markets, which is weighing on operating margins and cash flow generation, the agency said.

Ratings are supported by the group's favorable strategic position in the high-growth broadband markets of the United Kingdom and Italy, S&P said.

The issuer's net debt-to-EBITDA ratio was about 4.8 times at Sept. 30.

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