At the same time, Moody's has affirmed the B2 Corporate Family (CFR) and Probability--Of-Default (PDR) ratings at Norcell. The agency has also affirmed the -- (i) B1 rating on the SEK3.5 billion senior secured bonds (due 2018) at Norcell Sweden Holding 3 AB (publ) and the senior secured bank debt (due 2017/18) at Norcell Sweden Holding 3 AB (publ) and Com Hem AB; and the (ii) Caa1 rating on the EUR287 million Senior Unsecured Notes (due 2019) at Norcell.

The (P)Caa2 rating for the PIK Notes reflects the fact that the Notes will be structurally as well as effectively subordinated to any existing and future indebtedness of the subsidiaries of the Issuer [including the EUR287 million Senior Unsecured Notes (due 2019) at Norcell] and will also not be guaranteed by any of the Issuer's subsidiaries.

RATINGS RATIONALE

The Issuer intends to use the gross proceeds from PIK Notes to (i) repay the outstanding PIK Loan (including capitalized interest) of SEK 1.58 billion; (ii) redeem up to SEK498 million in aggregate of PECs of NorCell S.à.r.l owned by BC Partners Limited and (iii) pay the net fees and expenses incurred in connection with this offering.

The interest on the PIK notes is optionally payable in cash at the election of the Issuer. However, given the Issuer is a holding company with no independent business operations, it will have to rely on the cash up-streaming from its subsidiaries to service the PIK with cash. The indentures for the EUR287 million Senior Unsecured Notes at Norcell and the SEK 3.49 billion of senior secured notes at Norcell's subsidiary, Norcell Sweden Holding 3 AB (publ) provide that Norcell would be able to make restricted payments outside of the restricted group of up to 50% of its Consolidated Net Income (as defined in the indenture) if it is able to incur SEK 1.0 of indebtedness on a pro forma basis pursuant to the debt incurrence test (of 5.25x consolidated leverage ratio). If the pro-forma consolidated leverage ratio is below 3.5x and there is no event of default outstanding, the 50% consolidated net income limitation will fall away.

The up-streaming of funds outside the restricted group is subject to the inter-creditor agreement and is also constrained by the permitted payments test of 4.0x net leverage (as defined in the Senior Facilities Agreement at Norcell Sweden Holding 3 AB (publ)).

As of September 30, 2012, the reported pro-forma net cash pay leverage at Norcell stood at approximately 4.5x based on last two quarters of annualized EBITDA. Norcell has managed to de-lever to approximately 5.4x Gross Debt/ EBITDA (as adjusted by Moody's -- excluding the PIK loan held by its shareholder BC Partners Limited of SEK 1.58 billion) for the last twelve months ending 30 September 2012. However, including the proposed PIK notes, the group's leverage would be 6.3x Gross Debt/ EBITDA (as adjusted by Moody's).

Moody's analysis takes into consideration (i) the operational pressures negatively affecting Com Hem's top line growth due to increased competition and the mature nature of the Swedish market for its products; (ii) the improvement in Norcell's leverage (excluding the PIK loan held by its shareholder BC Partners Limited of SEK 1.58 billion) for the last twelve months ending 30 September 2012, not only coming from EBITDA growth but also from the favourable foreign exchange translation impact associated with the EUR denominated debt in the capital structure; and (iii) the uncertainties that arise from the PIK debt being outside of the restricted group.

The B2 CFR for Norcell reflects the (i) modest scale of Com Hem's revenues relative to rated peers in Europe; (ii) competition that Com Hem faces from local area network (LAN) and digital subscriber line (DSL) providers which offer their services alongside Com Hem's existing hybrid fibre coaxial (HFC) cable network through fibre LANs or their existing telephony infrastructure; (iii) significant leverage of the company; and (iv) expectation that de-leveraging in the near term will remain largely a function of EBITDA growth, given only a limited amount of amortising debt within the capital structure.

The CFR also takes into account (i) the company's good market positions in the Swedish triple play, digital TV ('DTV'), and broadband markets; (ii) its focus on Multi Dwelling Units ('MDUs') supported by its good relationships with a large and diversified landlord base; (iii) the competitive advantages of its technologically advanced network (90% of homes connected upgraded to EURODOCSIS 3.0 cable modem standard); and (v) its solid EBITDA margins.

The stable outlook is based on our expectation that going forward, Com Hem will be able to improve and restore its top-line growth helped by (i) further differentiating its DTV offering via launch of next generation TV services powered by TiVo (scheduled for launch in Q22013); and (ii) the launch of VoIP over WiFi in Q42012.

WHAT WILL CHANGE THE RATING UP/DOWN

Upward pressure could be exerted on the ratings once (i) Com Hem is able to improve its top-line growth by combating the current pressure on its subscriber volumes and consistently grow its blended ARPU; (ii) maintain the leverage at Norcell at well below 6.0x Gross Debt/ EBITDA (as adjusted by Moody's -- including the PIK notes) on a sustained basis; and (iii) continues to generate positive free cash flow generation.

On the contrary, downward pressure could be exerted on the ratings as a result of an increase in Norcell's leverage towards 7.0x Gross Debt to EBITDA (as adjusted by Moody's -- including the PIK notes), material deterioration in the operating performance, and/or negative free cash flow on a sustained basis.

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, Moody's will endeavour to assign a definitive rating to the Notes. A definitive rating may differ from a provisional rating.

The principal methodologies used in this rating were Global Cable Television Industry, published in July 2009, and 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.

Norcell is a holding company of Com Hem, which is the largest cable operator in Sweden with revenues of SEK4.52 billion in 2011 on a pro-forma basis.

REGULATORY DISCLOSURES

For ratings issued on a program, series or category/class of debt, this announcement provides relevant regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series or category/class of debt or pursuant to a program for which the ratings are derived exclusively from existing ratings in accordance with Moody's rating practices. For ratings issued on a support provider, this announcement provides relevant regulatory disclosures in relation to the rating action on the support provider and in relation to each particular rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides relevant regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. For further information please see the ratings tab on the issuer/entity page for the respective issuer on www.moodys.com.

The ratings have been disclosed to the rated entities or their designated agent(s) and issued with no amendment resulting from that disclosure.

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Moody's Investors Service may have provided Ancillary or Other Permissible Service(s) to the rated entities or their related third parties within the two years preceding the credit rating action. Please see the special report "Ancillary or other permissible services provided to entities rated by MIS's EU credit rating agencies" on the ratings disclosure page on our website www.moodys.com for further information.

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Gunjan DixitAsst Vice President - 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 MD - Corporate Finance 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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