Mexico-based operator faces possible downgrades as it gears up for €7.2bn KPN offer.
Mexican telecommunications company America Movil SAB is hopeful it can maintain its credit ratings after issuing long-term hybrid notes to lower its debt ratios, Chief Financial Officer Carlos Garcia Moreno said Thursday.
America Movil this week placed 2.1 billion euros in 60-year hybrid debt denominated in euros and sterling. Mr. Garcia Moreno said the notes, which ratings agencies treat as half equity, are aimed at improving the company’s balance sheet and lowering its net debt to earnings before interest, taxes, depreciation and amortization, or Ebitda.
Standard & Poor’s and Moody’s Investors Service are reviewing America Movil’s ratings, with the possibility of downgrades, after the company–controlled by billionaire Carlos Slim–said in August that it plans to make a EUR7.2 billion buyout offer for Dutch telecommunications company Royal KPN NV, of which it already owns close to 30%.
The buyout offer threw into question America Movil’s commitment to its target of less than 1.5 times net debt to Ebidta. The ratio was above 1.6 times at the end of June.
Mr. Garcia Moreno said in an interview that America Movil’s investment-grade ratings are among the highest in the western hemisphere for a telecommunications firm, and he wants to keep it that way. He said that he met recently with ratings agencies to discuss scenarios, and make it clear America Movil doesn’t aim to increase its leverage.”They’re comfortable with this, and I have the impression that they could reaffirm the ratings,” he said.
Fitch Ratings reaffirmed America Movil’s ratings this week following the issuance of the hybrid debt.
Mr. Garcia Moreno declined to say anything about the KPN offer, for which America Movil had already secured financing commitments. The potential bid hit a major snag last week when an independent foundation set up to protect the interests of the Dutch firm exercised an option giving it just under 50% of KPN’s voting rights.
America Movil disputed the foundation’s assertions that its bid for KPN is hostile, but said it would consider withdrawing the offer if the foundation maintains its opposition to the transaction.
The KPN investment is part of America Movil’s attempts at diversifying into Europe, having exhausted its acquisition possibilities in Latin America where it is the biggest mobile service provider. America Movil also has a 24% stake in Telekom Austria AG.
