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Fitch: Virgin Media's Receivables Financing Tap Issue in Line With Guidance
September 11, 2017 / 11:07 AM / 9 days ago

Fitch: Virgin Media's Receivables Financing Tap Issue in Line With Guidance

(The following statement was released by the rating agency) LONDON, September 11 (Fitch) Fitch Ratings says that Virgin Media Receivables Financing I DAC's receivables financing notes (RFNs) tap issuance (rated 'B+(EXP)'/'RR5(EXP)') is in line with Fitch's previous guidance. The RFNs' ratings are one notch lower than Virgin Media Inc.'s (VMED) Long-Term Issuer Default Rating (IDR) of 'BB-' and a notch higher than the group's senior unsecured debt. The RFNs' original ratings reflected Fitch's assessment of the security and transaction structure, which places the RFNs structurally senior to VMED group's senior unsecured debt. The new issuance is a tap of the GBP350 million notes due September 2024 and issued in September 2016. As such the terms, conditions and structure of the notes are identical to the 2016 issuance. With issuance at this tier of the capital structure expected to remain within the parameters guided by Fitch at the time of the original issue, the tap has the same instrument and recovery ratings. The RFNs (and associated VM facilities) benefit from guarantees from Virgin Media Senior Investments Limited (VMSI) as well as a number of opco obligors, creating structural seniority relative to the group's senior unsecured debt given that the latter is not guaranteed by VMSI. From an organisational perspective, VMSI sits closer to the operating assets of the group. The unsecured debt does not benefit from guarantees from any of the operating companies (for a comprehensive overview of the rating rationale see here). As identified in our original instrument rating rationale, the RFNs rank equally with other vendor finance (VF) obligations of the VMED group. In total these liabilities stood at around GBP801 million at June 2017; a value that Fitch expects to increase as the group's Project Lightning build continues to ramp. Fitch has guided an overall limit of around GBP1.5 billion (looking through year-end seasonal peaks and in the context of the group's existing cash flow scale) to be a tolerance for this kind of funding before the notching uplift of the notes relative to unsecured debt is likely to fall away. At the time of the original RFN issuance, secured debt ranking ahead of the RFN/VF debt was around 4.3x 2016 Fitch forecast EBITDA; with a GBP1.5 billion VF threshold equivalent to a further 0.7x of EBITDA leverage. Based on our current forecast 2017 EBITDA, the cap structure at June 2017 and a GBP1.5 billion VF threshold, these ratios have not materially changed. With VMED's 'BB-' IDR, Fitch does not apply bespoke recoveries to its capital structure. It is important nonetheless that these parameters remain broadly in place; with undue increases in secured leverage or the weighting of VF liabilities within the structure likely to erode the notching assigned to the RFNs. Contact: Stuart Reid Senior Director +44 20 3530 1085 Fitch Ratings Limited 30 North Colonnade London E14 5GN Brendan Condon Director +44 20 3530 1599 Tom Steabler Associate Director +44 20 3530 1661 Media Relations: Adrian Simpson, London, Tel: +44 203 530 1010, Email: adrian.simpson@fitchratings.com. Additional information is available on www.fitchratings.com ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.FITCHRATINGS.COM. PUBLISHED RATINGS, CRITERIA, AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. 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