Research Update: Optics Bidco SpA Assigned 'BB+' Rating; Outlook Negative

On July 1, 2024, Kohlberg Kravis Roberts&Co. L.P. (KKR) completed the acquisition of Telecom Italia SpA's (TIM's) Italy-based fixed-line wholesale operator Optics Bidco SpA (Optics). KKR financed the deal through the issuance of about €4.7 billion in senior secured term loans, an equivalent of €5.5 billion exchanged bonds from TIM, and a substantial equity injection. Following this, Optics will be the leading fixed-line wholesale operator in Italy, benefiting from its significant market share in the broadband and ultra-broadband fixed market with limited network overlap, high capital barriers, and favorable growth opportunities. However, we expect the company's large fiber-to-the-home (FTTH) capital expenditure (capex) program will result in negative free operating cash flow generation (FOCF), which, combined with expected dividend

...- On July 1, 2024, Kohlberg Kravis Roberts & Co. L.P. (KKR) completed the acquisition of Telecom Italia SpA's (TIM's) Italy-based fixed-line wholesale operator Optics Bidco SpA (Optics). - KKR financed the deal through the issuance of about 4.7 billion in senior secured term loans, an equivalent of 5.5 billion exchanged bonds from TIM, and a substantial equity injection. - Following this, Optics will be the leading fixed-line wholesale operator in Italy, benefiting from its significant market share in the broadband and ultra-broadband fixed market with limited network overlap, high capital barriers, and favorable growth opportunities. - However, we expect the company's large fiber-to-the-home (FTTH) capital expenditure (capex) program will result in negative free operating cash flow generation (FOCF), which, combined with expected dividend payments, will increase forecast leverage over the next two years. - We assigned our '##+' long-term issuer credit and issue ratings to Optics and the...

Research Update