MOODY’S Investors Service, a leading provider of credit ratings, research, and risk analysis today affirmed MTN Group Limited Baa2 local currency global scale issuer rating and A1.za national scale issuer rating while assigning a provisional (P)Baa2 rating to the proposed long-term guaranteed unsecured notes to be issued by MTN (Mauritius) Investments Limited.
The proposed notes will be irrevocably and unconditionally guaranteed by its 100% parent company, MTN Group Limited, Mobile Telephone Networks Holdings Proprietary Limited, MTN International (Mauritius) Limited, MTN International Proprietary Limited, Mobile Telephone Networks Proprietary Limited and MTN Treasury limited. The rating outlook is stable.
“Proceeds from the bond issuance will be used for general corporate purposes, strengthening its liquidity profile and positioning the Group to take advantage of potential growth opportunities that may arise,” Dion Bate, a Moody’s Vice President — Senior Analyst and local
market analyst for MTN said.
Furthermore, given MTN’s current low consolidated adjusted debt to EBITDA of 0.96x an issuance of up to USD750 million will not have a material negative impact on MTN’s credit profile.
RATINGS RATIONALE
The proposed notes are unsecured obligations and will rank pari-passu with all other existing and future unsecured and unsubordinated debt obligations of MTN Group Limited, including the Group’s USD1 billion (ZAR10.6 billion) revolving credit facility (RCF) due 2019.
The notes benefit from irrevocable and unconditional guarantees from material subsidiaries, including amongst others MTN’s holding company, MTN Group Limited. The (P)Baa2 rating of the proposed notes assumes that the final transaction documents will not be materially different from draft legal documentation reviewed by Moody’s to date and that these agreements are
legally valid, binding and enforceable.
Assuming notes totaling USD 750 million are issued we expect the impact MTN’s consolidated leverage to be small (as defined as gross debt to EBITDA and per Moody’s standard adjustments) increasing from 0.96x to approximately 1.1x on a pro forma basis as of 30 June 2014.
MTN’s global scale issuer rating of Baa2 and national scale issuer rating of A1.za reflect the company’s strong brand and position as the number two operator in the maturing South African market (which contributes approximately 27% of revenues and 21% of EBITDA, for the last twelve months (LTM) to 30 June 2014) as well as its leading market position in
most of the 22 countries in which it operates, including Nigeria (which
contributes around 36% of revenues and around 49% of group EBITDA, for LTM to 30 June 2014).
LIQUIDITY
MTN’s strong liquidity profile will enable the company to cover its cash needs over the next twelve months. Cash generated by operating activities is expected to cover capital investments in Nigeria, South Africa and Iran, as well as the company’s dividend payout ratio of 70% (dividends divided by net income before unusual items), as of 30 June 2014.
In addition to the company’s cash generation capability, MTN has access to sizable cash balances of approximately ZAR18.7 billion within its head office companies, as well as ZAR11.9 billion available under its committed credit facilities, as at 30 June 2014. Based on its healthy cash-flow generation capabilities, existing cash balances and committed, unutilised facilities, Moody’s does not expect the group to be affected by short-term liquidity constraints.
OUTLOOK
The stable outlook reflects Moodys expectation that MTN’s credit profile will continue to remain strong supported by subscriber and top-line growth trends in most of its markets. Furthermore, the outlook assumes MTN’s continued ability to upstream the majority of its cash flows and that its liquidity profile at group and subsidiary levels remains
prudently managed.
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