Fitch puts Vodafone on watch

Fitch Ratings said it placed Vodafone Group plc's long-term issuer default rating and senior unsecured ratings of BBB+ on Rating Watch negative.

The negative watch reflects that Vodafone's funds from operation-to-adjusted net leverage following the planned acquisition of Liberty Global's cable assets in Germany, Czech Republic, Hungry and Romania is likely to be 0.5x higher than originally expected, Fitch explained.

This is primarily due to a combination of higher-than-expected payments for spectrum and greater competitive pressure in Italy and Spain, the agency said.

Fitch said it now expects pro-forma net leverage to reach 4.2x in 2020 following the completion of the transaction and to subsequently remain higher than the downgrade threshold for a BBB+ rating of 3.5x for the following three years.

The agency said it does believe the company will take measures to accelerate de-leveraging to enable it to meet its 2.5x to 3.0x unadjusted net leverage target range.

In the absence of visibility on further de-leveraging initiatives by the company, the agency said it will likely downgrade the ratings by one notch when the transaction is completed.

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