Parent company of 3 in line for credit-rating cut
Move not expected to hit telecoms giant's Irish unit
Published 10/08/2010 | 05:00
THE parent company of mobile communications company 3 is set to have its credit rating cut, it was revealed yesterday.
The ratings agency Moody's Investor Services said it was putting the A3 issuer rating of the telecoms giant Hutchison Whampoa (HWL) "on review for possible downgrade", as well as the guaranteed debt issued by the group's financing subsidies.
The move comes only days after 3 signed up to be the main sponsor of the Irish football team in a deal worth about €7.5m over four years.
It is also two-thirds of the way though a three-year deal to sponsor golf's Irish Open.
The telecoms company declined to comment last night. The downgrade is not expected to materially affect its operations here.
Moody's said the review came on the back of HWL's interim results last week and the announcement by a subsidiary that it was part of a consortium bidding £5.8bn (€6.97bn) for the UK electricity distribution network from EDF Energy.
"The review was prompted by HWL's slower-than-expected trend in deleveraging, such that its key credit metrics remain weak for its rating, and despite improvements in the performance of the 3G business and most of its other key businesses," said Elizabeth Allen, a senior credit officer with Moody's.
The agency said it had "previously expressed concern over HWL's modest credit metrics, as well as the uncertainty over the timing and magnitude of its deleveraging".
"Moody's analysis focuses on cash flow to net debt metrics. As such and in particular, HWL's annualised adjusted funds from operations of around 15pc as of June 2010 represented a slight improvement over December 2009; however, such a level is currently below what Moody's expects for their rating," the agency said.
HWL has a stated target of lowering its net debt to net capital ratio from 30pc to the mid-20s but Moody's questioned whether this was feasible, especially on the back of the bid for the British energy network.
In Ireland, 3 has some 500,000 customers and has focused on the mobile broadband market. Last week it started selling the iPhone for the first time.