OREANDA-NEWS. S&P Global Ratings today assigned its 'B' issue rating with a '6' recovery rating to the proposed ?350 million senior unsecured Receivables Financing Notes to be issued by Virgin Media Receivables Financing Notes I Designated Activity Company. This company is an orphan special purpose vehicle (SPV) in the Virgin Media Inc. (Virgin Media; BB-/Stable/--) structure. Virgin Media is a U. K.-based provider of TV, fixed broadband, fixed-line telephony, and mobile services in the U. K. and Ireland.

The proceeds from the new notes, maturing in September 2024, will be used to participate in Virgin Media's existing vendor financing program. The transaction will have a neutral impact on leverage. We understand that it is part of Virgin Media's strategy to diversify capital sources and manage short-term refinancing risk.

In our view, the SPV meets the following conditions:

All of its debt obligations are backed by equivalent-ranking obligations with equivalent payment terms issued by Virgin Media group (the receivables and certain other Virgin Media facilities);As a strategic financing entity for Virgin Media, it is set up solely to raise debt on behalf of the group; andWe believe Virgin Media is willing and able to support the SPV to ensure full and timely payment of interest and principal when due on the debt issued by the SPV, including payment of any expenses of the SPV. Hence, we rate the debt issued by this SPV relative to other debt obligations of Virgin Media and treat the contractual obligations of the SPV as financial obligations of Virgin Media. The issue rating on the proposed new notes is in line with the issue ratings on senior unsecured debt issued by Virgin Media, although the notes will be structurally senior to unsecured notes. The rating is constrained by the significant amount of prior ranking secured debt and the unsecured nature of these notes.

We have affirmed our existing 'BB-' issue rating with a recovery rating of '3' on the group's senior secured debt. We have also affirmed our 'B' issue rating with a recovery rating of '6' on the group's unsecured notes, reflecting their structural and contractual subordination to the senior secured debt.

Our hypothetical default scenario assumes increased competition and rising marketing costs. We value Virgin Media as a going concern given its strong market position in the U. K. and the high barriers to entry of the industry.

Simulated Default Assumptions:Year of default: 2020EBITDA at default: ?1,050 millionImplied enterprise value multiple: 5.75xJurisdiction: United KingdomSimplified Waterfall:Gross enterprise value at default: ?6,040 millionAdministrative costs: ?420 millionNet value available to creditors: ?5,620 millionPriority debt: ?90 millionSenior Secured Debt: ?8,780 million*--Recovery expectation: 50%-70% (higher end of the range)Unsecured debt claims (1): €2,680 million*--Recovery expectation: 0%-10%Subordinated convertible debt: ?43 million*All debt amounts include six months' prepetition interest. We assume the RCF to be 85% drawn at default.(1) Include the proposed Senior Unsecured Receivables Financing Notes.