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Rating Action:

Moody's changes CWC's outlook to stable; affirms Ba3 CFR

03 Jun 2022

New York, June 03, 2022 -- Moody's Investors Service ("Moody's") has today affirmed the corporate family rating (CFR) of Cable & Wireless Communications Limited (CWC) at Ba3. At the same time, Moody's affirmed the Ba3 ratings on CORAL-US CO-BORROWER LLC (Coral-US) and Sable International Finance Limited (SIFL), and the B2 senior unsecured ratings of C&W Senior Finance Limited. All outlooks were changed to stable from negative.

The change of CWC's outlook to stable from negative reflects Moody's expectation that CWC credit metrics will gradually recover as the company continue with its focus on cost controls, integrates the acquisition of Claro Panama, benefits from the increase in tourism activity and relaxation of confinement rules in Panama and the Caribbean.

While inflationary pressures, political instability and FX volatility continue to be risks, CWC's ratings affirmation considers its strong liquidity and the company's sound business model with leading market positions in the countries in which it operates, supportive of strong profitability. The Ba3 CFR takes into consideration the company's large exposure to emerging economies and increased competitive pressures in some of its largest markets.

Affirmations:

..Issuer: C&W Senior Finance Limited

....GTD Senior Unsecured Regular Bond/Debenture, Affirmed B2

..Issuer: Cable & Wireless Communications Limited

....Corporate Family Rating, Affirmed Ba3

..Issuer: CORAL-US CO-BORROWER LLC

....GTD Senior Secured Bank Credit Facility, Affirmed Ba3

..Issuer: Sable International Finance Limited

....GTD Senior Secured Bank Credit Facility, Affirmed Ba3

.... GTD Senior Secured Regular Bond/Debenture, Affirmed Ba3

Outlook Actions:

..Issuer: C&W Senior Finance Limited

....Outlook, Changed To Stable From Negative

..Issuer: Cable & Wireless Communications Limited

....Outlook, Changed To Stable From Negative

..Issuer: CORAL-US CO-BORROWER LLC

....Outlook, Changed To Stable From Negative

..Issuer: Sable International Finance Limited

....Outlook, Changed To Stable From Negative

RATINGS RATIONALE

The affirmation of CWC's Ba3 CFR is also supported by its solid liquidity and Moody's expectation that, the company will continue generating positive free cash flow. Liquidity is further supported by a large cash balance of $541 million as of March 2022 and its fully available $630 million committed revolving credit facilities ($580 million due in January 2027, and $50 million due June 2023). CWC does not face any large debt maturity before 2027.

The effects of the pandemic hit CWC due to its large portion of revenues coming from the B2B (36%, with about two thirds coming from governments and enterprises and one third SME's, including hospitality) and mobile (21% of total) amid marked GDP contractions (-7% to -18%) in 2020 in the countries in which CWC operates.

This led CWC's Moody's adjusted leverage to persistently hover at 5.5 times during 2021. As of March 2022, CWC's debt/EBITDA ratio of 5.2x, is still high for the Ba3 rating category. Nonetheless, Moody's expects that CWC continues its path towards lower leverage, at 4.7x by 2023. Despite increased competition, CWC maintained a solid Moody's adjusted EBITDA margin of close of 38.1% for the last twelve months ended March 2022, following 37.7% in 2021 and 38.7% in 2020. Moody's expect CWC's EBITDA margin to continue improving towards 40%, driven by the company's cost-cutting initiatives, efficiencies gained and the consolidation of Claro Panama's operation. Given the long-term amortizing nature of the company's debt, any leverage reduction will be driven by EBITDA improvements.

CWC operates in Panama and the Caribbean and most of its markets have large exposures to travel and tourism. Arrivals to Jamaica, CWC's second largest market, in 2021 averaged 55% of 2019 levels, with monthly data approaching 80% of 2019 levels by the end of the year. In addition, Moody's currently projects positive 2022 GDP growth between 3% and 7% in Panama, Jamaica, The Bahamas, Trinidad and Tobago and Barbados, jurisdictions that together account for 65% of CWC's revenues.

In September 2021, CWC announced plans to acquire Claro Panama S.A., a subsidiary of America Movil, S.A.B. de C.V. (A3 negative) for $200 million. The transaction will consolidate CWC competitive position in Panama, its main market. Upon the consolidation, expected during the second half of 2022, CWC will generate 27% of its revenue in Panama, up from 22% today. Proforma for this acquisition, CWC' revenues will increase 34% in the mobile segment and 8% on a consolidated basis.

The B2 rating on senior unsecured notes continue to reflect their positioning in the waterfall behind the $2.6 billion in secured debt, including Coral-US's term loans B-5, also rated Ba3, the new term loan B-6 and the senior secured notes at SIFL, all of them rated Ba3. Upon the refinancing executed in September 2021, the proportion of senior secured debt increased to 68% from 55%, including the RCF. The senior secured debt benefits from the guarantees of SIFL, C&W Senior Secured Parent Limited, Sable Holding Limited, CWIGroup Limited, Cable and Wireless (West Indies) Limited, and Columbus International Inc and share pledges of all the guarantors and issuer as collateral, while the unsecured debt benefits from a collateral that comprises the capital stock of the notes' issuer.

FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATINGS

A rating upgrade could be considered if more conservative financial policies help reduce leverage (Moody's-adjusted debt/EBITDA) to less than 3.0x on a consolidated basis while the company maintains its adjusted EBITDA margin at least around 40% and generates strong positive free cash flow (FCF), all on a sustained basis.

CWC's ratings could be downgraded if there is a material weakening of its liquidity position. Quantitatively, a downgrade could take place if (1) the company's leverage does not recover towards 4.0x (on a consolidated basis); (2) its adjusted EBITDA margin declines toward 35% on a sustained basis; (3) it makes a large cash distribution to its parent company.

The principal methodology used in these ratings was Telecommunications Service Providers published in January 2017 and available at https://ratings.moodys.com/api/rmc-documents/48906. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology.

CWC is an integrated telecommunications provider offering mobile, broadband, video, fixed line, business, IT and wholesale services in Panama, Jamaica, The Bahamas, Trinidad and Tobago, Barbados and other markets in the Caribbean. For the 12 months ended March 31, 2022, the company generated revenue of $2.3 billion. As of the same date, CWC served 2.2 RGUs through its fixed network that passes 2.4 million homes. Buying Claro Panama effectively gives CWC around 760,000 more mobile subscribers in Panama, on top of its roughly 1.6 million only in Panama, and 3.5 million subscribers, on a consolidated basis, as of March 2022.

REGULATORY DISCLOSURES

For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions.

For ratings issued on a program, series, category/class of debt or security this announcement provides certain regulatory disclosures in relation to each rating of a subsequently issued bond or note of the same series, category/class of debt, security 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 certain regulatory disclosures in relation to the credit rating action on the support provider and in relation to each particular credit rating action for securities that derive their credit ratings from the support provider's credit rating. For provisional ratings, this announcement provides certain 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 issuer/deal page for the respective issuer on https://ratings.moodys.com.

For any affected securities or rated entities receiving direct credit support from the primary entity(ies) of this credit rating action, and whose ratings may change as a result of this credit rating action, the associated regulatory disclosures will be those of  the guarantor entity.  Exceptions to this approach exist for the following disclosures, if applicable to jurisdiction: Ancillary Services, Disclosure to rated entity, Disclosure from rated entity.

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

These ratings are solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com.

Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review.

Moody's general principles for assessing environmental, social and governance (ESG) risks in our credit analysis can be found at https://ratings.moodys.com/documents/PBC_1288235.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the EU and is endorsed by Moody's Deutschland GmbH, An der Welle 5, Frankfurt am Main 60322, Germany, in accordance with Art.4 paragraph 3 of the Regulation (EC) No 1060/2009 on Credit Rating Agencies. Further information on the EU endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.

The Global Scale Credit Rating on this Credit Rating Announcement was issued by one of Moody's affiliates outside the UK and is endorsed by Moody's Investors Service Limited, One Canada Square, Canary Wharf, London E14 5FA under the law applicable to credit rating agencies in the UK. Further information on the UK endorsement status and on the Moody's office that issued the credit rating is available on https://ratings.moodys.com.

Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating.

Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating.

Rosa Morales
Asst Vice President - Analyst
Corporate Finance Group
Moody's de Mexico S.A. de C.V
Ave. Paseo de las Palmas
No. 405 - 502
Col. Lomas de Chapultepec
Mexico, DF 11000
Mexico
JOURNALISTS: 1 888 779 5833
Client Service: 1 212 553 1653

Marcos Schmidt
Associate Managing Director
Corporate Finance Group
JOURNALISTS: 0 800 891 2518
Client Service: 1 212 553 1653

Releasing Office:
Moody's Investors Service, Inc.
250 Greenwich Street
New York, NY 10007
U.S.A.
JOURNALISTS: 1 212 553 0376
Client Service: 1 212 553 1653

No Related Data.
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