Kabel Deutschland Holding AG -- Moody's assigns (P)B1 to Kabel Deutschland Holding AG's EUR 300 million senior notes due 2017

KDH will lend on the proceeds from the Notes to KDVS by way of a subordinated intercompany loan. KDVS may use the net proceeds to partially finance the purchase price for the Telecolumbus acquisition ("the acquisition") and related fees, or for general corporate purposes if the acquisition does not go through.

Following the issuance of the Notes, KDH's EUR 600 million unsecured bank bridge facility -- put in place to finance the acquisition - will be reduced to EUR 300 million.

RATINGS RATIONALE

The Notes will be unsecured and will not benefit from any guarantees from operating companies. The (P)B1 rating on the Notes, two notches below KDH's CFR, reflects the Notes' structural and contractual subordination in right of payment to all debt issued at KDVS.

Payment of principal and interest for the debt at KDH, which is outside of the opco restricted group, relies on distributions from KDVS. Assuming no event of default, KDVS has the capacity to service the debt at KDH through a combination of restricted payments capacity in the notes and debt service flexibility in the loan agreement for debt incurred at KDH. Moody's expects that KDVS will have sufficient headroom to upstream cash to maintain KDH's dividend programme in addition to servicing its debt obligations.

In FY 2011/12, KDH delivered a solid operating performance - reporting growth in revenues and adjusted EBITDA of 6.3% and 9.1%, respectively. Going forward, Moody's expects KDH to benefit from: (i) the good growth potential for its broadband and premium TV; (ii) investment in the network which should result in improved service reach and capabilities as well as (iii) the company's strong operating leverage. As of 31 March 2012, KDH reported a net debt to EBITDA ratio of 3.4x. The company has publicly reiterated its commitment to its long-term net leverage target (as calculated by the company) of 3.0x to 3.5x. Pro-forma for the acquisition, the company expects to reach its leverage target within 2 years after closing of the transaction.

The stable outlook reflects Moody's expectation that the company will continue to grow its revenue and EBITDA, largely driven by a steady increase in its internet and telephony subscribers. It also reflects our assumption that KDH will be able to integrate Telecolumbus effectively and in a timely manner given the success of its precedent integration of part of Telecolumbus's assets in 2008. Upward pressure could be exerted on KDH's ratings as a result of: (i) continued strong operating momentum; (ii) adjusted gross debt to EBITDA (as defined by Moody's) moving towards 4.0x at the level of KDH on a sustained basis; and (iii) continued solid free cash flow generation (as defined by Moody's - post capex and dividends). Downward pressure could arise if the company were to: (i) significantly under-perform against its publicly stated guidance regarding EBITDA while registering a substantial increase in capex; and/or (ii) experience an increase in leverage well above 5.0x gross debt to EBITDA (as defined by Moody's) on a sustained basis.

The principal methodology used in rating Kabel Deutschland Holding AG was the Global Cable Television Industry Methodology published in July 2009. Other methodologies used include 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.

Moody's issues provisional ratings in advance of the final sale of securities and these ratings reflect Moody's preliminary credit opinion regarding the transaction only. Upon a conclusive review of the final documentation, including any possible changes during the syndication process, Moody's will endeavour to assign a definitive rating to the facilities. A definitive rating may differ from a provisional rating.

KDH is the largest Level 3 cable TV operator in Germany. For FY 31 March 2012, KDH reported revenues of EUR1.7 billion and adjusted EBITDA (as calculated by KDH) of EUR795 million.

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Gunjan Dixit Analyst Corporate Finance Group Moody'sInvestors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Chetan Modi Associate Managing Director Corporate Finance Group JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 Releasing Office: Moody's Investors Service Ltd. One Canada SquareCanary WharfLondon E14 5FA United Kingdom JOURNALISTS: 44 20 7772 5456 SUBSCRIBERS: 44 20 7772 5454 (C) 2012 Moody's Investors Service, Inc. and/or its licensors and affiliates (collectively, "MOODY'S"). All rights reserved.

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