Virgin Media O2’s bonds are slumping again on Friday, extending weeks of declines that have sent its notes to deeply distressed levels.
Some bonds due 2033 and 2032 are quoted at just over a third of face value, taking their drops to more than 25 basis points since the start of October, according to data compiled by Bloomberg. A vendor financing note issued by Virgin Media O2 due in July 2033 fell as much as 5.3 cents on the euro on Friday to 37.7 cents, halving in value since early July.
Meanwhile the implied odds of the British telecommunications firm defaulting has risen to near-certainty, based on the surging cost to insure its bonds against the risk of a breach.
The latest selloff was triggered by regulatory scrutiny of Nexfibre Networks Ltd.’s acquisition of Netomnia Ltd. The UK competition regulator has warned the deal could hurt competition, putting at risk a transaction expected to generate about £1 billion ($1.3 billion) of cash toward deleveraging Virgin Media. Nexfibre is backed by Virgin Media shareholders Telefonica SA and Liberty Global Plc.
Bloomberg Intelligence puts the odds of the deal being blocked outright at about 40%, with the remaining 60% likely to rely on “strict remedies involving pricing and investment concessions that would dilute the deal’s benefits,” according to analyst Erhan Gurses.
Speculation is growing that the company could pursue a more aggressive debt overhaul. Virgin Media and its shareholders have sought to reassure creditors, but the risk has moved to the forefront as its bonds sink deeper into distress.
Read More: Virgin Media’s Bond Rout Rattles European Junk Debt Market
It’s another setback for fiber broadband networks, wrong-footing investors that staked billions on the industry expecting defensive returns. Instead, a rush of new entrants has intensified competition and squeezed businesses already under pressure from high borrowing costs.
Many investors are still nursing losses exacted during the debt restructuring of Altice France, and the aggressive tactics used by Patrick Drahi across his telecommunications empire.