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UPC Broadband Finco B.V. -- Moody's assigns a B1 rating to UPC's new senior secured notes due 2031

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Rating Action: Moody's assigns a B1 rating to UPC's new senior secured notes due 2031Global Credit Research - 07 Apr 2021London, 07 April 2021 -- Moody's Investors Service, ("Moody's") has today assigned a B1 instrument rating to the new USD1,250 million senior secured notes due 2031 to be issued by UPC Broadband Finco B.V. The outlook on the rating is stable.The proceeds from the new senior secured notes due 2031 will be on-lent to UPC Financing Partnership, a subsidiary of UPC Holding B.V. (UPC), in the form of a new USD-denominated Finco Loan under the existing UPC Credit Facility. UPC Financing Partnership will then use the proceeds from the new Finco Loan to refinance the EUR600 million senior secured notes due 2027 issued by UPCB Finance IV Limited, of which an aggregate principal amount of EUR540 million remains outstanding as of 31 December 2020, and otherwise for general corporate and/or working capital purposes of the UPC group, including the repayment of other senior secured indebtedness. The new Finco Loan will benefit from the same guarantee and security packages as the existing loans raised under the UPC Credit Facility.RATINGS RATIONALEThe B1 instrument rating assigned to the new senior secured notes due 2031 reflects their pari passu ranking with senior secured bank credit facilities and other senior secured notes, rated B1, but behind liabilities at the operating subsidiaries, including trade payables, pension obligations and lease rejection claims, which have been ranked highest in order of priority. The pari passu ranking of the senior secured notes and senior secured bank credit facilities reflects Moody's view that the on-lending of the new senior secured notes within the UPC group via the new Finco Loan establishes a claim position for holders of such notes that is broadly equivalent to that of existing lenders under the UPC bank facility. The second-ranking position of the senior secured debt and senior secured credit facilities reflects the fact that they are secured only over the shares in the obligors held by any member of the senior secured group or any obligor, and over intercompany loans made by the obligors. The guarantor coverage test for the senior secured debt is on a consolidated basis, and so, the guarantees are from the borrower group (including only holding companies) representing a minimum of 80% of EBITDA on a consolidated basis. The senior unsecured notes issued by UPC Holding B.V., rated B3, are ranked last in priority of claims, reflecting the fact that they are structurally subordinated to the senior secured debt.On 11 November 2020, Liberty Global plc (Ba3 stable), the parent of UPC, completed the acquisition of Sunrise Communications Group AG (Sunrise) through the settlement of an all cash public tender offer of the outstanding shares of Sunrise. As of December 31, 2020, Liberty Global held 98.9% of the share capital of Sunrise and has initiated a statutory squeeze-out procedure according to applicable Swiss law pursuant to which it will acquire the remaining Sunrise shares that it does not yet own. This squeeze-out procedure is expected to be completed prior to the issue date of the new senior secured notes. Upon the consummation of the squeeze-out, which is expected to take place on or around 12 April 2021, the CHF1,610 million (equivalent) Term Loan B-1 due 2029 raised in August 2020 to refinance indebtedness of Sunrise and the EUR213 million revolving credit facility due 2026 raised to support the liquidity of Sunrise, and which have been initially part of the Sunrise restricted group, will be converted into UPC credit facilities ranking pari passu with UPC's existing senior secured credit facilities.The stable outlook reflects (1) Moody's expectation that UPC's pressure on revenues and EBITDA will be mitigated by growth at Sunrise over the next two years and (2) the company will maintain adjusted leverage at or below 6.0x.FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGUpward pressure on the rating could develop over time if (1) UPC's operating performance improves materially with the timely realization of synergies and the eventual upside from convergent opportunities leading to sustainable revenue and EBITDA growth; (2) its adjusted Gross Debt/EBITDA ratio (as calculated by Moody's) falls below 5.0x on a sustained basis; and the company maintains a strong cash flow generation. Downward ratings pressure could develop if (1) UPC's Moody's adjusted Gross Debt/EBITDA ratio rose well above 6.0x on a sustained basis; and/or (2) operating performance deteriorates driven by increasing competition or problems in executing the integration of Sunrise. Negative pressure could also arise if liquidity were to deteriorate materially.Assignments:..Issuer: UPC Broadband Finco B.V.....Senior Secured Regular Bond/Debenture, Assigned B1 (LGD4)Outlook Actions:..Issuer: UPC Broadband Finco B.V.....Outlook, Assigned StableThe principal methodology used in this rating was Telecommunications Service Providers published in January 2017 and available at https://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 PROFILEUPC is a European cable company that operates principally in Switzerland, but also in Poland and Slovakia.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 rating has been disclosed to the rated entity or its designated agent (s) and issued with no amendment resulting from that disclosure.This rating is 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 EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on www.moodys.com.Please see www.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.Please see the ratings tab on the issuer/entity page on www.moodys.com for additional regulatory disclosures for each credit rating. Sebastien Cieniewski VP - Senior Credit Officer Corporate Finance Group Moody's Investors Service Ltd. One Canada Square Canary Wharf London E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Peter Firth Associate Managing Director Corporate Finance Group JOURNALISTS: 44 20 7772 5456 Client Service: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. 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