Moody’s rates Optics, notes Ba1

Moody’s Ratings said it assigned a Ba1 to Optics BidCo SpA’s planned senior secured notes to be issued for bond exchange offers launched by the TIM group. The total size of the notes will be up to $5 million to be issued in euro- and dollar-denominated tranches.

The agency also assigned Optics a Ba1 corporate family rating and a Ba1-PD probability of default rating. The outlook is stable. Optics is indirectly owned by Kohlberg Kravis Roberts & Co. LP, which is expected to buy Telecom Italia SpA's entire fixed-line network in Italy (NetCo) making it the largest independent fiber network in Europe.

“The results of the exchange offer would be considered as part of the acquisition price, and Optics will not receive any cash proceeds after giving effect to it. Following the completion of the proposed acquisition, Optics will be the parent company of NetCo. Therefore, the CFR assigned to Optics consolidates the legal and financial obligations of NetCo and reflects the overall debt features of the newly created Optics group. The assigned ratings assume successful completion of the planned acquisition,” Moody’s said in a statement.

Additionally, the agency warned, “Given the large scale and complexity of the separation process, NetCo may face organizational challenges or additional costs that could hinder its ability to improve its operational performance and weaken the company's credit metrics.

“In addition, the Ba1 CFR also takes into account NetCo's ambitious FTTH roll-out plan that aims to cover 65% of Italian households by 2027, which will translate into total capital expenditure (including discretionary growth capex) of around €1.5 billion-€2 billion per annum over the next three years. Such an investment plan is subject to execution and cost overrun risks, particularly in the context of a newly created entity."

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