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Thursday, October 25, 2012

Telefónica Shores Its Up 'Firewall'

Per www.globalinsolvency.com:


Fri., October 26, 2012
Spanish telecom giant Telefónica SA, one of the world's most indebted companies, could establish two units—one in Latin America and one in Europe—to protect itself from any further worsening of Spain's economic troubles, its chief financial officer said, The Wall Street Journal reported. The company, among Spain's largest by market capitalization and a once-proud symbol of its boom-time expansion, is immersed in the country's troubles. Being Spanish makes it tough—and expensive—for Telefónica to finance its €58 billion ($75 billion) debt; in September, it paid interest rates five times as high as France Télécom to sell its bonds. And the economic collapse of Spain, which accounts for a third of the company's operating profit, makes it harder for Telefónica to carry so much debt. As a result, the company is pursuing a host of steps to cut its debt and decouple itself from its home country, moves that have already given it easier access to financing in recent weeks. But that hasn't erased speculation about whether the company could leave Spain altogether. Indeed, the question of whether southern European companies might abandon their home countries took on greater urgency earlier this month when Coca-Cola Hellenic Bottling Co. announced plans to move its headquarters to Switzerland, citing difficulty getting financing in its Greek home market. Telefónica Chief Financial Officer Angel Vilá ruled out any plans to leave Spain, but suggested there were other ways to segregate Telefónica's European business from its large and healthy Latin American operations.

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