Hong Kong, January 08, 2014 -- Moody's Investor's Service has upgraded the corporate family
rating of P.T. MNC Sky Vision to B1 from B2.
The outlook on the rating is stable.
RATINGS RATIONALE
The rating action follows the redemption of Sky Vision's USD165
million 12.75%, 2015 senior secured bonds on 12 December
2013. The redemption was funded with a USD 250 million, three-year
syndicated loan which was signed in November 2013.
"The refinancing exercise not only extended Sky Vision's debt
maturity profile by one year, but the incremental increase in debt
also provides additional capital to support the capex and working capital
needs associated with Sky Vision's organic growth over the next
few years," says Annalisa Di Chiara, a Moody's
Vice President and Senior Analyst.
"In addition, interest on the term loan of LIBOR +425bp
will reduce Sky Vision's funding costs considerably, helping
to bolster cash flows. The decline in interest costs will also
help offset some of the effect of the currency mismatch between its Rupiah-based
revenues and USD-denominated interest costs," adds
Di Chiara, also Moody's Lead Analyst for Sky Vision.
"The upgrade also reflects Sky Vision's continued strong operating
performance, as demonstrated by its year-on-year subscriber
growth of 37% in the first nine months of 2013 and its leading
position in the domestic pay-TV market with its market share remaining
above 70%. Given the significant level of under-penetration
in its domestic market, we believe Sky Vision is well-positioned
for robust organic growth over the medium to long term, and expect
EBITDA margins to remain in the 40% range," adds Di
Chiara.
In addition, Sky Vision's credit metrics are well positioned
for its B1 rating, and even with its increased debt burden,
the company should maintain adjusted debt/EBITDA below 2.5x.
Furthermore, the decrease in interest costs will provide significant
cash flow benefits and improve its interest coverage ratio from the current
5.5x range.
The rating also continues to reflect the company's small revenue base,
the competitive headwinds it will face as other operators increase investment
in pay-tv services, satellite operation risks and exposure
to foreign currency volatility.
While the company's revenues are denominated in Rupiah, a
significant portion of its programming costs and capex is is USD denominated
as are its interest costs. However, with the reduction in
interest costs combined with the company's solid operating performance
and liquidity, there is still some cushion to absorb currency fluctuations.
For example, with a further 10% depreciation in the Rupiah,
Sky Vision's debt/EBITDA should remain below 3.0x,
which is strong for the B1 rating level.
The stable outlook reflects our expectation that Sky Vision's leading
market share and product offering will continue to support significant
organic growth over the next 12-18 months, and support EBITDA
margins in the 40% range.
Given the upgrade, further positive rating action is unlikely over
the medium term. However positive momentum could build should Sky
Vision maintain its market share and adjusted EBITDA margins above 40%
whilst growing the revenue base. Moody's would also like
to see an improvement in ARPU and the company achieve consistent positive
free cash flow such that adjusted free cash flow/debt is above 10%.
On the other hand, downward pressure could develop should competition
intensify and result in a decline in the company's market share and operating
profit margins. Specifically, the outlook or ratings could
come under pressure if operating margins deteriorate below the 35%
range, or the company's cash cushion deteriorates materially,
such that it would need to rely on additional external funds to support
its growth. Sustained negative free cash flow generation over the
longer term or more aggressive shareholder initiatives, including
sizeable dividends, would also be negative for the rating.
In addition, any reduction in Global Mediacom's shareholding in
Sky Vision, which would change the parent company's undertakings
and ability to support Sky Vision, will also have a negative impact
on Sky Vision's rating.
The principal methodology used in this rating was the Global Pay Television
- Cable and Direct-to-Home Satellite Operators published
in April 2013. Please see the Credit Policy page on www.moodys.com
for a copy of this methodology.
Headquartered in Jakarta, MNC Sky Vision is a provider of direct-to-home,
pay-TV services. The company is 66% owned by PT Global
Mediacom Tbk, a diversified media company, and in which PT
MNC Investama Tbk owns a 53.4% stake. Both Global
Mediacom and MNC Investama are publicly listed in Indonesia.
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 rating action on the support provider and in relation to each particular
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 rating action, and
whose ratings may change as a result of this 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.
The first name below is the lead rating analyst for this Credit Rating
and the last name below is the person primarily responsible for approving
this Credit Rating.
Annalisa Di Chiara
Vice President - Senior Analyst
Corporate Finance Group
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Philipp L. Lotter
MD - Corporate Finance
Corporate Finance Group
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (65) 6398-8308
Releasing Office:
Moody's Investors Service Hong Kong Ltd.
24/F One Pacific Place
88 Queensway
Hong Kong
China (Hong Kong S.A.R.)
JOURNALISTS: (852) 3758 -1350
SUBSCRIBERS: (852) 3551-3077
Moody's upgrades MNC Sky Vision to B1; outlook stable
