Credit rating agency Moody's has downgraded its rating on BCM Ireland Finance, the Australian-owned holding company that controls Eircom. Moody's said the downgrade reflected a slower pace of improvement in the telco's credit profile due to "more aggressive" financial policies and its adoption of "more ambitious" capital expenditure plans.

The agency said the introduction last November of a €425 million payment-in-kind (PIK) note was part of an early distribution of capital to shareholders in the form of a holding company dividend.

Such notes added complexity to Eircom's broader ownership group and placed limits on the potential for upward rating pressure in the medium term, the agency said.

"Moody's notes that the company was already weakly positioned in its rating category following the refinancing of its capital structure in August 2006."

The ratings agency also cited the addition of €250 million to Eircom's expected capital expen-diture and its plans for a third-generation service at Meteor, its mobile unit.

"This additional capex plan will slow the de-leveraging profile that we expected at the time of the initial rating assessment," the ratings agency said.

Moody's now expects that the ratio of Eircom's debt to earnings before interest tax depreciation and amortisation will not fall below six times until 2009.

The agency lowered its corporate family rating on BCM Ireland Finance to B1 from Ba3 and downgraded to B2 from B3 its rating on the holding company's €350 million senior unsecured notes.

Moody's also downgraded to B2 from B3 its rating on a second-tier €350 million loan to BCM Ireland Holdings, a related company.

However, it left unchanged its Ba3 rating on a €3.3 billion unsecured lending facility from BCM Ireland Holdings.