"The rating action reflects a weakened financial risk profile and heightened execution and integration risk from large, mainly debt-funded acquisitions, which outweigh the positive impact on 4iG's business risk profile from the significant growth being pursued," Scope said.
The action came days after 4iG said it signed an agreement to acquire 100% of telecommunications company DIGI for EUR 625 million. 4iG also announced its intent to issue a 10-year, HUF 350 billion bond in the framework of the Bond Funding for Growth Scheme (BGS) of the National Bank of Hungary (MNB) to "partially finance" upcoming acquisitions.
Scope noted that 4iG also has plans to acquire a 51% stake in Spacecom, 100% of Telenor Montenegro, further telecommunications assets in the Western Balkans, and a majority stake in state-owned terrestrial broadcasting company Antenna Hungaria through the in-kind contribution of its telecommunications portfolio.
The agency acknowledged that the acquisitions will benefit 4iG's business risk profile when completed but said it expects a "significant deterioration in credit metrics".
Scope estimated 80% of the combined HUF 460 bln of 4iG acquisitions in the pipeline will be debt-funded.
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