Fitch upgrades Kabel Deutschland notes to BB-, rates loans BB-

Fitch Ratings said it affirmed Kabel Deutschland Vertrieb und Service GmbH & Co.'s BB- issuer default rating and assigned a BB+ rating to the company's recently signed €1.35 billion senior secured bank facilities. Fitch also upgraded holding company Kabel Deutschland GmbH's senior notes to BB- from B+, in line with the agency's methodology of the recently launched recovery ratings. The outlook is stable.

The ratings reflect the company's well-established and stable subscriber base, low but predictable average revenue per subscriber and well-contained operating cost base. The agency predicted that the attractiveness of the digital product should boost core TV revenues and help consolidate customer loyalty to the cable product.

The rating also takes into account the fact that despite the company's strong and consistent cash flow generation, its high debt burden has led to significant cash interest charges and a balance sheet that is unlikely to deleverage quickly, Fitch said. Capital expenditure associated with the company's digital roll-out and investments in high-speed internet and telephony services further affect free cash flows.

Debt to EBITDA in the 12 months to December was 2.77x.

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