TalkTalk’s credit rating has been downgraded by Fitch Ratings, moving it to a “very high level” risk.
The company’s rating was downgraded from CCC to CC, with a debt default deemed probable.TalkTalk owes £1 billion to its lenders, with two repayment deadlines in November and February 2025.
The ratings action reflects these maturity dates and the communication in late July that stakeholders are in discussions about a refinancing deal that may include an extension of those dates. It doesn’t, however, reflect any to change to the financial analysis of the business.
The latest ratings change comes as founder Sir Charles Dunstone and shareholders Toscafund and Ares attempt to secure a rescue deal, having pledged a £400 million package, comprising approximately £200 million of additional capital and £200 million of assets, to win lenders’ support in refinancing the company.
A deal could result in bondholders and banks extending the repayment deadline to 2027 in return for the £400 million package.
Fitch Ratings cited the group’s “imminent refinancing risks” and “weak financial flexibility to service upcoming debt maturities” as key reasons for the downgrade.
The rating action follows TalkTalk’s announcement in late July that it was holding talks with lenders over a debt refinancing.
Fitch Ratings said: “Given challenging refinancing conditions, we see a high likelihood of a debt restructuring resulting in a distressed debt exchange. This would include material reduction in terms for the senior secured notes to avoid default.”
It’s the second time that Fitch Ratings has downgraded TalkTalk this year. It cut its rating of the company’s debt by one notch in January 2024 to CCC.
TalkTalk owes £365 million through a revolving credit facility and £685 million in the form of bonds falling due for repayment next February.
A TalkTalk spokesman said: “We anticipate agreement on new capital investment into the business in the near future, and discussions to achieve that are ongoing.”