Moody's downgrades C&M

Moody's Investors Service said it downgraded C&M Co. Ltd.'s corporate family rating and C&M Finance Ltd.'s senior unsecured bond rating to B1 from Ba2.

This action concludes the review for possible downgrade that began on Feb. 21, and the outlook is stable.

The agency said the downgrade reflects the consolidation impact of the financing incurred by the company's new shareholders to partly fund the acquisition of C&M. The new shareholders, a consortium of financial and strategic investors led by MBK Partners and Macquarie Korean Opportunities Fund, have structured acquisition financing (including 1.2 trillion Korean won in term loans) through a special-purpose entity, Kookmin Cable Investment. Moody's expects the adjusted debt-to-EBITDA ratio to be more than 7.5 times over the next two to three years.

There are restrictions on the ability of C&M to upstream cash to Kookmin Cable, but ultimately Kookmin Cable will rely on the dividend flow from C&M to keep current its 300 billion Korean won interest tranche, Moody's said, and lenders for the acquisition facility will be secured by shares in C&M, suggesting that in a default situation they may potentially take control of the company.

The agency said the B1 rating balances C&M's highly competitive position and attractive EBITDA margins against its relatively small size on an international scale, the potential threat arising from the commercialization of Internet Protocol-TV and the impact on the competitive environment resulting from the recently announced changes in regulations that now allow South Korean telecommunications providers to offer bundled packages with IPTV.

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