Sunrise Communications Holdings S.A. -- Moody's assigns (P)Ba3 rating to Sunrise's senior secured notes offering

Sunrise will use the proceeds from the offering plus CHF200 million of existing cash on the balance sheet to repay all indebtedness outstanding under the group's existing senior secured term loan facilities. Concurrently, Sunrise will merge its existing acquisition and revolving credit facilities ("RCF") into a combined CHF250 million RCF facility, with a lighter covenant package. Moody's expects to withdraw the ratings on the CHF500 million Term Loan A and the CHF320 million Term Loan B facilities upon their repayment.

The following ratings of different group entities remain unchanged:

- Corporate family rating (CFR) and probability of default rating (PDR) of Sunrise Communications Holdings S.A.: B1

- EUR561 million of 8.5% senior notes due 2018 issued by Sunrise Communications Holdings S.A.: B3

- CHF300 million and EUR371 million of senior secured bonds due 2017 issued by Sunrise Communications International S.A.: Ba3

The outlook for all the ratings is stable.

Moody's issues provisional ratings in advance of the final sale of securities and these ratings reflect the rating agency's preliminary credit opinion regarding the transaction only. Upon a conclusive review of the final documentation, Moody's will endeavour to assign a definitive rating to the group's proposed senior secured fixed- and floating-rate notes. The definitive ratings may differ from the provisional rating.

RATINGS RATIONALE

The (P)Ba3 rating on the proposed senior secured fixed- and floating-rate notes is one notch above the CFR, reflecting the impact of the presence of junior debt in Sunrise's capital structure. The new notes rank pari passu with the existing senior secured notes and the new RCF. In addition, the new fixed- and floating-rate senior secured notes will carry the same covenants as the existing senior secured notes.

In Moody's view, the refinancing of the existing bank debt with senior secured bonds has no impact on Sunrise's rating, which remains well positioned in the B1 category.

In terms of credit metrics, Moody's considers that the transaction is broadly neutral. This view is based on the fact that although Sunrise has achieved a gross debt reduction by utilising CHF200 million of cash balances, this will be offset by the adjustment that Moody's will make to the company's debt figure to capture the deferred consideration of the spectrum auction to be paid in June 2015 (CHF97 million) and December 2016 (CHF97 million).

Nevertheless, Moody's notes that this refinancing, which represents a demonstration of Sunrise's focus on reducing financial debt, is a positive development in a number of ways. The refinancing will allow the company to extend its debt maturity profile, as all term debt amortisations until 2017 will be removed. In addition, by maximising the amount of CHF-denominated debt on its balance sheet, Sunrise is reducing its exposure to currency swings and its need for foreign currency hedging will diminish.

From a liquidity perspective, Moody's expects that Sunrise's cash position will materially decline at the outset, but the company's liquidity profile will be supported by a large and unused RCF and strong cash flow generation capacity. Moreover, the new RCF will have only two covenants, and the headroom will be reset, improving the company's financial flexibility.

The B1 CFR reflects the strength of Sunrise's business-risk profile, which is mitigated by the weakness of its financial profile following the leveraged acquisition of the company in 2010 by funds advised by CVC Capital Partners. The rating primarily reflects the company's high leverage as a result of the acquisition debt, with debt/EBITDA of 4.4x (as adjusted by Moody's) for financial year (FY) 2011. However, these factors are balanced by (1) Sunrise's strong position in the Swiss telecoms market, as the leading integrated alternative operator with reported market shares of 16% and 24% in the fixed and mobile telephony segments respectively; (2) the relative stability of the competitive, regulatory and macroeconomic environments in Switzerland; (3) the company's expected strong and stable cash flow generation; and (4) a comfortable liquidity position.

The stable outlook reflects that Sunrise is well positioned in the B1 rating category, as well as Moody's expectation that the company's credit metrics will gradually improve over time, with no major competitive, macro or regulatory threat envisaged over the near to medium term.

WHAT COULD CHANGE THE RATING UP/DOWN

Upward pressure on the rating could develop if Sunrise's management team delivers on its business plan, such that the company's (i) debt/EBITDA ratio (as adjusted by Moody's) reaches 4.0x or below; and (ii) retained cash flow (RCF)/debt ratio (as adjusted by Moody's) trends towards 15% or higher.

Conversely, downward pressure could be exerted on the rating if Sunrise's operating performance weakens such that debt/EBITDA (as adjusted by Moody's) is higher than 5.0x and RCF/debt (as adjusted by Moody's) is below 10% on a sustained basis.

PRINCIPAL METHODOLOGY

The methodologies used in these ratings were Global Telecommunications Industry published in December 2010, and Loss Given Default for Speculative-Grade Non-Financial Companies in the U.S., Canada and EMEA published in June 2009. Please see the Credit Policy page on www.moodys.com for a copy of these methodologies.

Sunrise Communications Holdings S.A. ("Sunrise") is the ultimate parent of Sunrise Communications AG. Headquartered in Zurich, Sunrise is the second-largest integrated telecommunications operator in Switzerland. In 2011, the company reported revenues of CHF1,984 million (c. EUR1.6 billion) and EBITDA of CHF608 million (c. EUR500 million). The company is owned by funds advised by private equity firm CVC Capital Partners.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

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