Telecom Italia bonds hit by revised earnings forecast

Telecom Italia SpA bonds are softer this morning after the company late yesterday evening (Dec. 15) revised down its 2021 earnings forecast on the back of lower-than-expected revenue.

The Italian former monopoly partly attributed the decline to its partnership with streaming service DAZN, which it entered earlier this year to distribute Italy's Serie A soccer matches. The company said it expected EBITDA to be higher than €5.4 billion, down from €6.73 billion in 2020.

The group's €1 billion of 1.625% notes due 2029, issued in January, were down nearly a point at 92.17 on the bid, according to Tradeweb prices, having closed at 93 yesterday, according to S&P Global Market Intelligence data.

Price movements lower down the borrower's debt curve were less pronounced, but near-term maturities have still sold off, with the company's 4% notes due 2024 today trading at 104.8/105.4, according to Tradeweb, down from 105.125 yesterday. The operator has roughly €9 billion of bonds maturing between 2022 and 2024.

The latest selling follows a turbulent period for Telecom Italia bondholders, with the group's debt hit last month after KKR announced a €33 billion non-binding offer to take the company private in deal that would rank as the largest European leveraged buyout in history. Its debt then firmed after the group's largest shareholder, Vivendi, announced that it would oppose the offer, and the bonds were little changed on Dec. 13, even as speculation that the New York investment firm was planning a formal offer sent shares up by more than 4%.

The approach from the private equity firm comes against the backdrop a worsening credit outlook for Telecom Italia, with S&P Global Ratings in November downgrading the company to BB, from BB+, on the back of lower revenue growth and heightened competition in its domestic market. The company is rated Ba2 and BB+ by Fitch.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.