Research Update: U.K.-Based TalkTalk Outlook Revised To Positive On FibreNation Sale And Expected Cash Flow Improvement; Ratings Affirmed

On Jan. 21, TalkTalk Telecom Group PLC announced that it had reached an agreement to sell the entire issued share capital of its FibreNation subsidiary to CityFibre Holdings for £200 million. The sale is expected to close in March. TalkTalk intends to use nearly all of the cash proceeds to repay debt. This will reduce its S&P Global Ratings-adjusted debt to EBITDA as well as its future capital expenditure (capex). We are therefore revising the outlook on TalkTalk to positive from stable and affirming our 'BB-' long-term issuer credit rating. The positive outlook reflects the potential for an upgrade over the next 12 months if TalkTalk stabilizes its revenue base and significantly lowers its exceptional costs. This would lead TalkTalk's

...- On Jan. 21, TalkTalk Telecom Group PLC announced that it had reached an agreement to sell the entire issued share capital of its FibreNation subsidiary to CityFibre Holdings for ú200 million. The sale is expected to close in March. - TalkTalk intends to use nearly all of the cash proceeds to repay debt. This will reduce its S&P Global Ratings-adjusted debt to EBITDA as well as its future capital expenditure (capex). - We are therefore revising the outlook on TalkTalk to positive from stable and affirming our '##-' long-term issuer credit rating. - The positive outlook reflects the potential for an upgrade over the next 12 months if TalkTalk stabilizes its revenue base and significantly lowers its exceptional costs. This would lead TalkTalk's adjusted debt to EBITDA to fall toward 3x and its adjusted free operating cash flow (FOCF) to debt to rise above 10% in FY2021....

Research Update