Moody’s places SFR-Numericable under review for downgrade

Credit rating agency Moody’s has placed SFR-Numericable under review for downgrade following its joint offer with majority owner Altice to buy out the 20% stake in the company still held by Vivendi for €3.9 billion. 

Numericable-SFR intends to acquire half of Vivendi’s stake through a share buyback programme which is to be submitted to Numericable-SFR’s general assembly for approval by April 30. The other half is to be acquired by Altice France at the same time with a payment to be made no later than April next year. Vivendi’s board is currently evaluating the offer.

“Today’s rating action is prompted by significant uncertainties about the funding of the envisaged €1.95 billion share repurchase programme and its impact on Numericable-SFR’s liquidity, leverage and operational flexibility. Moody’s views the potential transaction as aggressive given that the company closed the large acquisition of SFR only recently and is still in the early stage of integrating the acquired asset,” the ratings agency said.

Moody’s will look at the company’s post-transaction liquidity provision, evidence of progress made in integrating SFR and Numericable and the impact of Altice’s increased stake on risk.

Moody’s said the company could be downgraded as a result of negative findings in these areas and as a result of any further acquisition. The agency said it could downgrade SFR-Numericable if its debt-EBITDA ration were to exceed 4.5 for a sustained period of time.

Separately, French trade union the CFDT has organised an online petition addressed to SFR-Numericable CEO Eric Denoyer expressing concern at a pay freeze that is part of an ongoing cost-cutting programme at the newly merged operator.

The petition condemns the management’s decision to cancel discretionary pay rises despite SFR posting a profit of over €1 billion and a margin in excess of 25%.

Unions are also reportedly unhappy about the new entity’s approach to supplier agreements, including late payment and the cancellation of contracts.