Moody's Ratings has upgraded four hybrid debt instruments issued by Vodafone Group Plc to Baa3 from Ba1, citing changes to their terms and conditions announced by the telecommunications company on the same day. The rating agency left the outlook on the securities stable.
The four upgraded issues are:
- a GBP 500 million hybrid maturing in 2086, callable in 2031 and issued in 2023;
- a EUR 750 million hybrid maturing in 2084, callable in 2029 and issued in 2023;
- a EUR 1,000 million hybrid maturing in 2080, callable in 2030 and issued in 2020;
- a EUR 500 million hybrid maturing in 2078, callable in 2028 and issued in 2018.
With the upgrade to Baa3, these hybrid securities are now rated one notch below Vodafone's Baa2 senior unsecured rating, rather than two notches below as before. The securities remain subordinated to all senior debt obligations but are senior to ordinary share capital and to certain USD-denominated hybrids that were not amended.
Moody's noted that the amended hybrids carry a contractual five-year limit on coupon deferral. The agency also said the four instruments are now rated in line with two other hybrid securities issued in September 2025 and are no longer treated as preferred-equivalent instruments.
For financial leverage metrics, Moody's continues to apply 50% equity credit and 50% debt treatment to these hybrids. The agency cited a set of structural features that support that split, including the option to defer coupons with mandatory settlement after five years, contractual maturities of at least 30 years, and the absence of any coupon step-up before year 10.
The stable outlook reflects Moody's expectation that Vodafone's operating performance will continue to improve after fiscal 2026. Moody's-adjusted debt/EBITDA is expected to decline gradually through fiscal 2028. The agency also said Moody's-adjusted retained cash flow to net debt should remain strong for the current rating despite some weakening following the cash buyout of VodafoneThree.
Context and implications
The upgrade narrows the rating gap between these hybrids and Vodafone's senior unsecured debt, altering the capital-structure positioning of the affected instruments. By maintaining mixed equity/debt treatment and a defined period for coupon deferral, Moody's has preserved a degree of equity-like loss absorption while recognising the amended contractual protections.
Moody's decision does not change the agency's view on the issuer's senior unsecured rating, which remains Baa2, and the stable outlook indicates the agency expects gradual balance-sheet improvement rather than immediate changes to credit trends.