Moody’s downgrades MTN global, national scale issuers and $750m senior unsecured notes

MTN-LogoMoody’s Investors Service today downgraded MTN Group Limited’s global issuer rating to Baa3 from Baa2, the national scale issuer rating to from and the $750 million senior unsecured notes due 2024 issued by MTN (Mauritius) Investments Limited to Baa3 from Baa2.

The outlook is negative, the rating agency said in a report issued today DECEMBER 15, 2015 and copied to

On October 29, 2015 Moody’s changed MTN’s Baa2 ratings from stable to negative following the announcement on October 26, 2015 that the Nigerian Communications Commission (NCC) has imposed a fine of Naira 1.04 trillion, about $5.2 billion on MTN Nigeria relating to the timing of the disconnections of just over 5.0 million improperly registered subscribers.

The NCC has subsequently reduced the fine to $3.9 billion following negotiations.

Moody’s says its latest actions follow the affirmation of Nigeria’s Ba3 Federal Government issuer ratings and the lowering of the foreign currency bond ceiling to Ba2 from Ba1 on December 10, 2015.

The rating agency notes that the downgrade to Baa3 captures the increased operational and sovereign risks from one of its key markets, Nigeria (Ba3 stable), where MTN Nigeria is a sizable contributor to Group EBITDA representing 48% of consolidated EBITDA (as of 30 June 2015).

Furthermore, it says, there continues to be uncertainty around the final outcome regarding the Naira 780 billion ($3.9 billion) fine imposed by the NCC on MTN Nigeria of which payment is required by the December 31, 2015.

Moody’s believes that the downgrade of the Nigerian foreign currency ceiling reflects a somewhat higher risk that the Nigerian government would impose a moratorium on other external borrowers in the event of its own severe financial distress.

“While Nigeria’s overall external vulnerability remains relatively low, the lowering of the foreign currency bond ceiling takes into account the recent restrictions imposed by the monetary authorities to conserve the central bank’s foreign exchange reserves,” Moody’s notes.

According to Moody’s among others, the negative outlook reflects the ongoing uncertainty surrounding the NCC fine and the possible impact on MTN’s liquidity profile given MTN at this point does not have sufficient funds readily available to immediately pay the $3.9 billion equivalent fine.

By Emmanuel K. Dogbevi

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