KKR sticks by request of due diligence on TIM – source

MILAN (Reuters) – U.S. investment firm KKR is keeping its request to access Telecom Italia’s data for a due diligence analysis before it can formalise its takeover bid, a person close to the matter said.

The request is contained in a letter that is expected to be sent to Telecom Italia (TIM) later on Wednesday, the person added.

KKR in November submitted a non-binding 10.8 billion euro takeover proposal for TIM after investing 1.8 billion euros last year for a 37.5% stake in the group’s last-mile fixed-line network.

Telecom Italia left the New York-based fund waiting nearly four months without an answer. But its board this month agreed to engage in talks, and gave its top executives a mandate to determine the scope and length of KKR’s possible due diligence analysis. KKR had asked in November for a four week due diligence period.

TIM has said that its board also told CEO Pietro Labriola and Chairman Salvatore Rossi to better understand the terms of KKR’s offer, asking in particular what effect it would have on TIM’s already high debt.

Debt normally amounts to the bulk of the financing of buyout offers such as KKR’s. But TIM’s debt load, which amounts to 22 billion euros, will make it hard for KKR to load it up with more debt if it completes the deal – as buyout firms typically do, bankers have said.

KKR in its letter on Wednesday said that the financial structure of the company would not change substantially were its offer to go through, according to the source.

In the latest sign of the group’s financial fragility, S&P Global on Wednesday cut its debt rating of TIM to ‘BB’ with a negative outlook.

The decision follows debt downgrades by Moody’s Investors Service and Fitch Ratings after TIM unveiled a record 2021 loss and a weak outlook as the new CEO Labriola presented a plan to separate its network assets from its services arm.

(Reporting by Elvira Pollina; Writing by Valentina Za; editing by Edward Tobin)