ECONOMY

S&P likely to downgrade OTE’s rating

Credit rating agency Standard & Poor’s yesterday placed its «A» long-term corporate credit rating on Greece-based telecommunications services provider Hellenic Telecommunications Organization SA (OTE) on CreditWatch with negative implications. At the same time, the «A» senior unsecured debt rating on related entity OTE PLC was also placed on CreditWatch with negative implications. The rating actions follow a payment failure by CosmoRom, a subsidiary of OTE’s Romanian subsidiary Romtelecom, the fixed-line Romanian telecoms operator. «The CreditWatch placement primarily reflects the activation of a cross-default clause in OTE’s guaranteed bond indenture and its senior loan facility, following the payment failure by CosmoRom,» said Standard & Poor’s credit analyst Simon Redmond. «As a result, bondholders have the right to full repayment of principal and accrued interest for as long as the cross default is outstanding.» The CreditWatch placement also follows a series of developments that, taken together, could result in a rating change or outlook revision. These include the statement of OTE’s potential future interest in other mobile operators in Romania; the recommencement of the group’s share buyback scheme and OTE’s evolving domestic competitive and regulatory environment, which put pressure on the ratings following the group’s acquisition of a controlling stake in Romtelecom.