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Fitch assesses fundraising offered by Airtel via bonds to ‘BBB-‘, hybrids planned by Network i2i to ‘BB, Telecom News, ET Telecom

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Kolkata: Global rating agencies, Fitch and S&P Global have assigned a “ BBB- ” rating to the senior unsecured US dollar notes offered by Bharti Airtels and a “ BB ” rating to the perpetual subordinated notes to be issued entirely by Network i2i the Mauritian arm telecommunications operators belonging to Mauritius.

This, even as Fitch estimates Bharti’s Indian wireless EBITDA will grow by around 40% to 50% in FY21, led by 25 million more subscribers and an improvement in average monthly revenue per user. (ARPU) from 10% to 12%. He also expects Bharti’s revenue for FY21 and overall EBITDA to grow by around 18% to 25%, due to improving India’s wireless market and continued growth in Africa, despite the economic slowdown caused by the pandemic.

“The senior unsecured notes offered by Bhartis will be rated in accordance with its senior unsecured rating of ‘BBB-‘, as they will rank at least on par with all of its other present and future unsecured and unsubordinated obligations,” said Fitch Ratings said in a press release Tuesday. .

The perpetual subordinated notes offered by Network i2i will be rated two notches below Airtel’s long-term issuer default rating (IDR), identical to the existing 5.65% perpetual subordinated bond rated “ BB to which they will rank pari passu, added Fitch.

The perpetual subordinated notes offered are similar to existing securities, ranking first only in Airtel’s equity. They will have five-year resettable coupons starting at 5.25 years with increases of 25 basis points after the initial 10.25 year term and an additional 75 basis points after 25.25 years.

“Therefore, we consider perpetual subordinated notes to have an effective maturity of 25.25 years,” said S&P Global.

S&P, however, reportedly said the outlook for Airtel remains negative as the company’s deleveraging path has been hampered by regulatory uncertainties and investments that have exceeded expectations. But he added that the stronger-than-expected profit growth of telecom operators dampened an immediate drop in ratings.

Airtel recently returned to the dark, posting a net profit of Rs 854 crore in the December quarter after six consecutive quarters of losses, on the back of a one-time gain linked to the BhartiInfratel and Indus Towers merger and a heavy user of the mobile broadband adds which led to save revenue.

Fitch Ratings, in turn, said the proceeds from the proposed senior unsecured notes and perpetual subordinates would be used to repay existing debt and for investments.
Airtel has reportedly appointed more than half a dozen investment banks, including Bank of America, Barclays, Citigroup, JP Morgan, HSBC and Standard Chartered Bank, which will help it raise more than $ 1 billion (Rs 7,500 crore) via foreign bonds. The bond sale is expected to start this weekend or early next week.

Airtel will meet with global fixed income investors on or after February 23, as part of its plan to raise up to Rs 7,500 crore via bonds to build up a war chest even as India’s second-largest telecommunications company needs cash to buy spectrum at the next 4G auction, invest in networks and also pay statutory dues, among other needs.

In this context, Fitch stated that the issue will be fully guaranteed by Bharti and will constitute a direct, unsecured and subordinated obligation of Bharti. The rating of the proposed notes will reflect the deeply subordinate nature, ranking junior to all existing and future debt obligations and senior only to Bharti common stock, he added.

The proposed perpetual subordinated securities will be eligible for a 50% equity credit as they meet Fitch’s criteria for deep subordination, effective maturity greater than five years, full discretion to defer coupon payments indefinitely interest, limited events of default and the absence of material covenants. and retrospective provisions.

Equity credit is capped at 50% due to the cumulative interest coupon, a feature that we consider more debt-like, Fitch said.

Fitch will treat coupon payments as 100% interest in its financial analysis of Bharti, despite the equitable treatment of 50% of the principal amount. This approach, he said, is in line with his criteria for treating and nicking corporate hybrids.

We anticipate a 50% equity credit for securities until 2041, five years before the effective maturity date in 2046, when the surrogate language expires. Equity credit drops to zero after 2041.



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