Research Update: Virgin Media Affirmed At 'BB-' On Closing Of Merger With O2; Outlook Stable

U.K. cable operator Virgin Media Inc. (VMED) has completed its merger with Telefonica U.K. (O2). We expect the combined company, VMED O2 U.K. Ltd., to maintain an S&P Global Ratings-adjusted debt to EBITDA of about 5x or below, supported by its financial policy of maintaining net leverage of 4x-5x. The merger enhances VMED's scale, market shares, and cost structure, as well as medium-term growth prospects and churn compared with its stand-alone position, but it is not transformative to our view of its business. We therefore affirmed our 'BB-' long-term issuer credit and issue ratings on VMED and its senior secured debt, as well as our 'B' issue rating on VMED's unsecured debt. The stable outlook reflects our expectation of about

...- U.K. cable operator Virgin Media Inc. (VMED) has completed its merger with Telefonica U.K. (O2). We expect the combined company, VMED O2 U.K. Ltd., to maintain an S&P Global Ratings-adjusted debt to EBITDA of about 5x or below, supported by its financial policy of maintaining net leverage of 4x-5x. - The merger enhances VMED's scale, market shares, and cost structure, as well as medium-term growth prospects and churn compared with its stand-alone position, but it is not transformative to our view of its business. - We therefore affirmed our '##-' long-term issuer credit and issue ratings on VMED and its senior secured debt, as well as our 'B' issue rating on VMED's unsecured debt. - The stable outlook reflects our expectation of about 5x leverage for VMED O2 along with free operating cash flow (FOCF) to debt of about 5%. We anticipate that revenue will stabilize and pro forma group EBITDA will return to growth in 2021....

Research Update