Moody's Investors Service says that the Baa3 ratings of Bharti Airtel remain unchanged following the announcement of a tap bond offering on its existing EUR 750 million 4% senior unsecured notes due 2018 issued by Bharti Airtel International (Netherlands) BV under the unconditional and irrevocable guarantee by Bharti. The tap offering will have the same terms and conditions as the existing notes, and will carry a Baa3 rating.
The outlook on Bharti's ratings is stable.
''Since the majority of the proceeds will be used primarily to refinance debt, the additional issuance will be leverage neutral, and will therefore have no impact on Bharti's ratings,'' says Laura Acres, a Moody's senior vice president.
''This issuance will also extend the company's debt maturity profile and diversify currency risk away from its USD debt, which is credit positive'' adds Acres, also Moody's lead analyst for Bharti.
On Nov. 26, 2013, Moody's assigned a Baa3 rating to its EUR 750 million 4% senior unsecured notes due 2018. The rating is underpinned by its receipt of strong and growing cash flows from its Indian operations, particularly in wireless, where it enjoys a well-established and leading market position under the Airtel brand.
At the same time, concerns exist regarding emerging market risks and, in particular, changes to the regulatory and political environments in the countries in which it operates, especially after its 2010 investment into 15 (now 17) African countries.
Bharti financial metrics are recovering following the 2010 debt-funded and transformational acquisition of wireless assets in Africa, coupled with high payouts on 3G auctions in the same year. Although its current leverage remains high for the current rating level, we anticipate continued absolute and relative deleveraging over the next 2-3 years.
As of Sept 2013, net debt/EBITDA in last twelve months (LTM) was about 2.18x. Notwithstanding improvements in Bharti's operating environment and financial metrics, the rating also takes into account the company's large USD-denominated borrowings and the currency mismatch with its revenue base. Whilst this situation may give rise to translation risk, the company has a board approved policy of hedging a minimum percentage of total foreign liabilities due, covering a substantial portion of liabilities due over the next 12-month period. All of the net proceeds of the EUR 750 million bond issuance in December 2013 were also used to pay down its USD debt exposure, thereby alleviating the impact of rupee depreciation.
Shares of the company declined Rs 1.9, or 0.57%, to trade at Rs 329.35. The total volume of shares traded was 11,575 at the BSE (11.06 a.m., Tuesday).
