Madrid, September 06, 2018 -- Moody's Investors Service ("Moody's") has today
placed MTN Group Limited's (MTN or Group) Ba1 corporate family rating
(CFR), Ba1-PD probability of default rating (PDR) and the
Aa3.za national scale corporate family rating on review for downgrade.
Moody's has also placed the Ba1 rating on all the senior unsecured
notes issued by MTN (Mauritius) Investments Limited on review for downgrade.
This follows two announcements from MTN over the past few days:
On 30 August 2018 MTN announced that MTN Nigeria received a letter from
the Central Bank of Nigeria (CBN) alleging that Certificates of Capital
Importation (CCI) issued in respect of the conversion of shareholder loans
in MTN Nigeria to preference shares in 2007 had been improperly issued.
As a consequence they claim that historic dividends repatriated by MTN
Nigeria between 2007 and 2015 amounting to $8.1 billion
need to be refunded to the CBN. MTN contends that they provided
the necessary documentation on the conversions to preference shares and
that all dividend repatriations to date were done against the equity CCI's.
On 4 September 2018 MTN announced that the Nigerian Attorney General (NAG)
has given notice to MTN Nigeria of an intention to recover $2 billion
in taxes relating to the importation of foreign equipment and payments
to foreign suppliers over the last 10 years. This compares to MTN
Nigeria's internal assessment and payment of $700 million
over the same period.
RATINGS RATIONALE
MTN's ratings have been placed on review for downgrade to reflect
the uncertainty around the potential implications of the recent CBN and
NAG announcements on MTN's credit profile. MTN's management
has indicated that both allegations are without merit and will be engaging
with the relevant authorities to defend its position and to get more clarity
on some of the requests being made. As such, there remains
a range of possible outcomes which will have different consequences on
MTN's credit profile. Accordingly, Moody's will monitor the
developments and will consider the credit implications as events unfold.
The review will focus on the impact on MTN's liquidity profile and
credit metrics as well as the implications on the Group should this be
a drawn out process.
In the absence of the $8.1 billion refund demand and potential
$1.3 billion tax liability shortfall, MTN has sufficient
liquidity to repay approaching debt maturities over the next 12 to 18
months with the next sizable refinancing wall only in 2021. There
is also sufficient covenant headroom under its revolving credit facilities,
with the tightest being leverage ratio covenant (consolidated total net
borrowings(net cash)/Adjusted Consolidated EBITDA) at 1.59x as
of 30 June 2018 compared to a threshold of 2.5x.
MTN Group Limited, based in South Africa, is the largest African-based
mobile telecommunications operator in terms of subscriber base and revenues.
Operating since 1994, MTN has leading market positions (No.
1 or 2) in 22 African and Middle Eastern countries with a total subscriber
base of 223 million, as of 30 June 2018. Its key markets,
South Africa and Nigeria, combined contribute 66% to consolidated
EBITDA.
For the last twelve months to 30 June 2018, MTN reported Group consolidated
revenue of ZAR130.8 billion (approximately USD10.2 billion)
and Moody's adjusted EBITDA of ZAR54.9 billion (approximately USD4.2
billion).
LIST OF AFFECTED RATINGS
On Review for Downgrade:
..Issuer: MTN (Mauritius) Investments Limited
....BACKED Senior Unsecured Regular Bond/Debenture,
currently Ba1
..Issuer: MTN Group Limited
....Probability of Default Rating, currently
Ba1-PD
....Corporate Family Rating, currently
Ba1
....NSR Corporate Family Rating, currently
Aa3.za
Outlook Actions:
..Issuer: MTN (Mauritius) Investments Limited
....Outlook, Changed To Rating Under
Review From Stable
..Issuer: MTN Group Limited
....Outlook, Changed To Rating Under
Review From Stable
The principal methodology used in these ratings was Telecommunications
Service Providers published in January 2017. Please see the Rating
Methodologies page on www.moodys.com for a copy of this
methodology.
Moody's National Scale Credit Ratings (NSRs) are intended as relative
measures of creditworthiness among debt issues and issuers within a country,
enabling market participants to better differentiate relative risks.
NSRs differ from Moody's global scale credit ratings in that they are
not globally comparable with the full universe of Moody's rated entities,
but only with NSRs for other rated debt issues and issuers within the
same country. NSRs are designated by a ".nn" country modifier
signifying the relevant country, as in ".za" for South Africa.
For further information on Moody's approach to national scale credit ratings,
please refer to Moody's Credit rating Methodology published in May 2016
entitled "Mapping National Scale Ratings from Global Scale Ratings".
While NSRs have no inherent absolute meaning in terms of default risk
or expected loss, a historical probability of default consistent
with a given NSR can be inferred from the GSR to which it maps back at
that particular point in time. For information on the historical
default rates associated with different global scale rating categories
over different investment horizons, please see https://www.moodys.com/researchdocumentcontentpage.aspx?docid=PBC_1060333.
The Local Market analyst for these ratings is Dion Bate, +27
(11) 217-5472.
REGULATORY DISCLOSURES
For ratings issued on a program, series or category/class of debt,
this announcement provides certain regulatory disclosures in relation
to each rating of a subsequently issued bond or note of the same series
or category/class of debt 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 ratings tab on the issuer/entity page for the respective
issuer on www.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.
Regulatory disclosures contained in this press release apply to the credit
rating and, if applicable, the related rating outlook or rating
review.
Please see www.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 ratings tab on the issuer/entity page on www.moodys.com
for additional regulatory disclosures for each credit rating.
Laura Perez Martinez
VP - Sr Credit Officer
Corporate Finance Group
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
David G. Staples
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
Releasing Office:
Moody's Investors Service Espana, S.A.
Calle Principe de Vergara, 131, 6 Planta
Madrid 28002
Spain
JOURNALISTS: 44 20 7772 5456
Client Service: 44 20 7772 5454
