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S&P trims TalkTalk
S&P said it lowered its ratings on TalkTalk Telecom Group Ltd. and its senior secured debt to CCC+ from B-. The 3 recovery rating on the company's senior secured debt is unchanged, indicating a 60% (rounded estimate) recovery if TalkTalk defaults. The agency also placed the long-term issuer credit rating on TalkTalk on CreditWatch with developing implications.
TalkTalk’s £685 million of 3 7/8% senior secured bonds come due in February 2025.
“The company has entered an exclusivity agreement with a new equity partner for its wholesale platform PXC, including a planned debt raise of about £490 million. Altogether, the proceeds of the transaction are sufficient to fully refinance TalkTalk's senior secured debt facilities. However, this plan remains subject to execution risk, and failure to close the transaction in a timely manner will put the company at risk of a liquidity shortfall or distressed exchange transaction over the next 12 months,” S&P said in a statement.
Additionally, the agency said it forecasts TalkTalk will underperform its guidance and adjusted EBITDA margins will decline to 18% in fiscal year 2024 (ending Feb. 28, 2024) from 20% the previous year.
“The CreditWatch placement reflects that we could lower the ratings further if the company fails to complete the transaction in the wholesale platform, materially increasing the risk of a near-term default. Conversely, we could raise the ratings if the transaction is successful, resulting in a refinancing of the senior debt and at the same time securing additional equity. In addition, rating upside will be subject to TalkTalk substantially reducing leverage and our expectation of improving operating performance paving the path to positive free cash flows,” S&P said.
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