Russian operator VimpelCom is considering a multi-step refinancing plan to improve the capital structure of its Italian telecoms unit Wind in a move that reports suggest could be a first step towards securing a merger for the company, which has debt of around $14.5 billion (€10.5 billion).
Wind competes with Telecom Italia, Vodafone Italy and 3 Italy as the third-largest player on the hard-fought Italian mobile market and has previously been seen as a possible target for Hutchison Whampoa and even former owner Naguib Sawiris, the Egyptian business tycoon.
It was rumoured in December that the Hong Kong group had met VimpelCom executives to discuss options for Wind. Hutchison Whampoa is following a strategy of building up its mobile assets across Europe; it has already acquired Orange Austria and is currently undergoing the regulatory process for O2 Ireland.
It was also reported last May that VimpelCom said it does not plan to sell Wind, in what was seen as an effective rebuff to Sawiris. The Egyptian businessman is now understood to have turned his attention back to Telecom Italia.
"In theory, Wind should merge with the Hutchison unit and this is simply a way to avoid being a distressed seller," an unnamed Italian analyst told Reuters. "Now we need to understand if this move can speed up or slow down the process but it all certainly points in that direction."
The refinancing plan may include a cash injection of €500 million ($695.7 million) by VimpelCom, the company said in a statement.
"The aim of the refinancing plan is to provide the group with significant interest cost savings, stronger cash flow generation, a deleveraging trajectory and an extended maturity profile," VimpelCom added.
The company said Wind was seeking lenders' consent to amend its lending agreement to allow the financing plan to be implemented. The amendments would include up to an additional €800 million of transaction costs, fees and expenses. The consent request expires on April 2, 2014 at 5 pm CET.
In February, Moody's Investors Service applauded VimpelCom's financial policy, announced on Jan. 28, noting that the plans should sustain the group's financial metrics and competitive positions. However, Moody's stopped short of changing VimpelCom's Ba3 stable rating, noting that the group, which is headquartered in Amsterdam, must first show the new financial strategy is bearing fruit before it considers an upgrade.
VimpelCom, part owned by Russian company Altimo and Norway's Telenor, has been on a drive to cut its $22.6 billion debt. In January the company said it would not pay a dividend for 2013, and will hold future payments at $0.0035 per share until it achieves a group net debt to EBITDA ratio of under 2 times.
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