Fitch downgrades Zoncolan

Fitch Ratings said it downgraded Zoncolan Bidco SpA’s long-term issuer default rating to B- from B and simultaneously withdrew the rating following its merger into Eolo SpA. The outlook was stable at withdrawal.

The agency also assigned Eolo a first-time long-term IDR of B- with a stable outlook. Fitch also downgraded Zoncolan’s senior secured notes to B from B+. Eolo, because of the intra-group merger, has assumed responsibility for Zoncolan's liabilities.

“The downgrade reflects a weaker-than-initially expected trajectory for Eolo's revenue and profitability, a significant increase in leverage, and our expectations of persistently negative free cash flow (FCF) due to high capex requirements. The lower profitability follows slower customer additions, due to delays in the FWA broadband rollout, and higher network costs,” Fitch said in a press release.

The outlook reflects expectations that Eolo will likely be able to access financing to fund its capital expenditures plan, the agency said.

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