OTE is given green light for waiver

OTE said yesterday it has received the go-ahead from shareholders allowing it to waive default clauses related to CosmoRom, giving it a degree of financial flexibility, but analysts said the telecoms operator is still not out of the woods. A majority of holders of a 1.1-billion-euro guaranteed note due 2007 issued by subsidiary OTE plc and guaranteed by OTE has consented «to waive certain defaults relating to CosmoRom and amend certain terms of the notes,» OTE said. The consent in effect frees OTE from its obligation to pay up in the event that CosmoRom, the entirely owned mobile telecoms subsidiary of RomTelecom, defaults on its liabilities, said Theodore Ritsios of P&K Securities. «The noteholders’ approval means that OTE will now have a degree of financial flexibility,» he said. CosmoRom’s troubles arose after it failed to pay outstanding trade liabilities of about 100 million euros, including interest owed to its equipment supplier, triggering off a non-payment default by OTE which controls a majority stake in RomTelecom. With first-quarter profits sharply down, OTE said it was not willing to help out financially. Early this month, it took its case to noteholders, offering to pay 2.50 euros for each 1,000-euro note held by holders who consented to waive the default clause. The offer expired on Monday. Resolving the CosmoRom issue, even if temporarily, doesn’t lessen the chances of OTE being downgraded by credit rating agencies Standard & Poor’s and Moody’s, said Ritsios. «The risks of a downgrade still remains,» he stressed. On May 27, Standard & Poor’s placed its «A» long-term corporate credit rating on OTE on creditwatch with negative implications, sparked off in part by CosmoRom’s payment failure but also due to its Romanian operations and its ability to compete in the highly competitive domestic market. Moody’s followed up the next day, warning of a possible downgrade to OTE’s long-term debt ratings. It cited the CosmoRom dispute and the greater risks arising from the company’s expansion in southern Europe. Standard & Poor’s is due to review its rating this month and Moody’s in July.

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