Rating Action: Moody's assigns B2 rating to Altice France's proposed notes; outlook negativeGlobal Credit Research - 13 Apr 2021Milan, April 13, 2021 -- Moody's Investors Service ("Moody's") has today assigned a B2 rating to the proposed $3 billion euro equivalent guaranteed senior secured notes due 2029, to be issued by Altice France S.A. ("Altice France"), a subsidiary of Altice France Holding S.A. ("Altice France Holding"). The outlook is negative.Proceeds from this debt issuance will be used to partially repay Altice France's $5.2 billion notes maturing in 2025."The refinancing will marginally increase Altice France's weighted average debt maturity to 5.9 years from 5.5 years, and provide additional interest savings of around E50 million," says Ernesto Bisagno, a Moody's VP-Senior Credit Officer and lead analyst for Altice."However, Altice France Holding remains weakly positioned in the rating category due its high Moody's adjusted leverage and weak free cash flow generation," added Mr Bisagno.A full list of affected ratings is provided towards the end of the press release.RATINGS RATIONALEThe B2 rating recognizes the company's (1) position as one of the leading convergent companies in the competitive French market; (2) scale and ranking as the second-largest telecom operator in France; (3) integrated business profile; (4) improved operating performance after years of revenue decline; and (5) improved liquidity, with no significant debt maturities until 2025.The rating is constrained by (1) the company's highly leveraged capital structure, with Moody's adjusted debt/EBITDA for Altice France Holding at 5.8x in 2020 (6.3x pro forma for the Hivory disposal); (2) its weak free cash flow generation; (3) the complexity of the group structure; (4) the competitive, although easing, nature of the French telecom market; and (5) stretched management resources, given the scale of the group.Moody's expects Altice France Holdings' EBITDA to continue to grow in the mid-single-digit percentage range in 2021-22 driven by ARPU improvements in mobile, a positive product mix with stronger contributions from residential fixed-line subscribers and additional business services revenue on the back of construction and maintenance fees paid by SFR FTTH (the recently acquired Covage will provide 12 months contribution from the construction activity by 2022). Profits will also benefit from additional cost savings and a recovery in economic conditions after the coronavirus crisis.The rating agency expects stronger operating cash flow over 2021-22, driven by higher earnings and reduced funding to Altice TV. Assuming capital spending of around E3.1 billion (including IFRS 16) and dividends paid to minorities of around E50 million - E100 million, Moody's expects free cash flow (FCF) generation to turn positive in 2021 and to improve further in 2022. However, any use of cash for additional intercompany funding could reduce the cash available for debt repayment at Altice France Holding level.LIQUIDITYThe company's liquidity is adequate, with no major debt maturities until 2025. Moody's expects Altice France Holdings' FCF to turn positive in 2021.Altice France Holding had cash of E542 million at December 2020, E1,115 million of committed undrawn revolving credit facilities (RCFs) at Altice France maturing in 2026 and a E186 million committed RCF at the holding level maturing in 2026.The RCF at Altice France is subject to a springing (drawings above 40%) net senior leverage covenant of maximum 4.5x. There is currently limited buffer of 9% under this covenant, assuming a pro forma net senior leverage of 4.1x (based on annualized last two quarters "L2QA").STRUCTURAL CONSIDERATIONSThe B2 rating of Altice France's proposed senior secured notes is at the same level as Altice France Holding's B2 corporate family rating (CFR). This reflects the pari-passu ranking with Altice France's pre-existing senior secured notes, and the bank credit facilities (including the RCF).RATIONALE FOR THE NEGATIVE OUTLOOKThe negative outlook reflects (1) its high leverage; (2) the highly competitive market conditions, with only a short track record of stabilisation in operating performance; (3) the complex financial structure of the group; and (4) its weak FCF generation.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGSUpward pressure on the ratings is unlikely in the short term, but may develop over time if Altice France Holding maintains strong liquidity with no refinancing risk and demonstrates a sustained improvement in its underlying revenue and key performance indicators (KPIs, for example, churn and ARPU), with growing EBITDA in main markets, leading to an improvement in credit metrics, such as: (1) Moody's-adjusted leverage sustained below 5.0x; and a (2) significant improvement in FCF on a consistent basis.The ratings could be downgraded if the company's underlying operating performance weakens, or debt increases further, leading to a deterioration in the group's credit fundamentals, such as: (1) Moody's-adjusted leverage not returning below 5.5x; and (2) FCF generation remaining negative. In addition, any deviation from management's commitment to deleverage or signs of deterioration in liquidity will lead to pressure on the ratings. LIST OF AFFECTED RATINGS ..Issuer: Altice France S.A. Assignment: ....Backed Senior Secured Regular Bond/Debenture, Assigned B2PRINCIPAL METHODOLOGYThe principal methodology used in these ratings was Telecommunications Service Providers published in January 2017 and available at http://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1055812. Alternatively, please see the Rating Methodologies page on www.moodys.com for a copy of this methodology.COMPANY PROFILEAltice France Holding is a leading telecom operator in France. The company reports its results under three segments: business to consumer (B2C; 63% of revenue), business to business (B2B; 33%) and media (4%). Altice France reported revenue and adjusted EBITDA (as defined by the company and pro forma for the group reorganisation) of E10.9 billion and E4.3 billion, respectively.REGULATORY DISCLOSURESFor further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found at: https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_79004.For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of the guarantor entity. Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.The ratings have been disclosed to the rated entity or its designated agent(s) and issued with no amendment resulting from that disclosure.These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website www.moodys.com.Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1243406.The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. 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