T-Mobile NL's new owners aim for a B rating

 First, a recap on the T-Mobile NL buy-out (values in EUR b):

A. Enterprise value: 5.10 (source: Deutsche Telekom)

B. Net debt (at 21Q2): 2.08 (source: Tele2)

C. Equity value 25%: 0.86 (source: Tele2)

D. Equity value 100%: 3.44 (follows from C)

E. Net debt: 1.66 (follows from A and D)

F. Debt reduction since 21Q2: 0.42 (from B and E). This is presumably the proceeds from the tower sale to Cellnex NL)

G. Net debt to be raised: 2.00 (source: S&P)

H. Total debt post debt raising: 3.66 (from E and G)

At 4.15%, the annual interest charge will be EUR 152m (possibly higher, if the existing debt (E) carries a higher rate).

How does this compare?

EBITDA AL LTM (last 12 months) is EUR 614m (delta yoy +12% from the Simpel takeover (1 Dec. 2020), synergies and one-offs). Hence a leverage of 5.94x.

FCF LTM is about EUR 348m, making the interest bill almost half (44%) of FCF.

For KPN (Moody’s: Baa3), this ratio is just 10%.

For VodafoneZiggo (Moody’s: B1), where all finance expenses are included, the ratio is currently 45%.

It would follow that the agencies would consider for T-Mobile NL’s new Term Note B a B-rating, plus or minus a notch for the quality of the free cash flow.