Saturday February 16, 2013

RAM reaffirms ratings on Binariang GSM sukuk

PETALING JAYA: RAM Ratings Services Bhd has reaffirmed the respective AA3/P1 and A2 ratings of Binariang GSM Sdn Bhd’s senior sukuk and junior sukuk ratings.

“We have maintained the negative outlook on both long-term ratings,” it said in a statement yesterday.

Binariang GSM’s senior sukuk consists of its RM19bil Islamic medium-term notes programmes and RM2bil Islamic commercial papers programme.

The junior sukuk, meanwhile, refers to the group’s US$900mil (RM2.78bil) cumulative non-convertible Islamic junior sukuk.

The company is an investment holding company with interests in telecommunications company Maxis Bhd and Aircel Ltd – India’s seventh largest mobile operator – and PT Axis Telekom Malaysia, the fifth largest mobile operator in Indonesia.

“The rating reaffirmation has given significant consideration to a proposed corporate restructuring exercise that aims to bring Binariang GSM’s sukuk holders a step closer to Maxis’ cashflow for debt servicing and also to enhance its debt-protection covenants,” RAM Ratings said.

The restructuring exercise will include the establishment of a special purpose vehicle (SPV) that would own the Maxis shares currently held by Binariang GSM.

Also, the exercise will see the exchange of Binariang GSM’s Islamic securities with the new senior and junior sukuk, which will be issued by the SPV.

Binariang GSM aims to complete the restructuring exercise by mid-year.

RAM Ratings said the negative outlook reflects its continuing concerns on the further deterioration of the group’s financial metrics, which are intensified by Aircel’s persistently weak performance.

“On this account, Aircel continued to report pre-tax losses amid an extremely competitive operating landscape and the unrelenting regulatory uncertainties in India. Aircel’s performance has significantly affected the group’s financial profile,” it said.

For the first time, Binariang GSM registered a pre-tax loss in 2011, which continued into the first half of the financial year ended Dec 31, 2012.

Aircel’s effect on Binariang GSM’s financial results is expected to continue, therefore affecting the group’s near-term profitability and debt-protection measures.

“It is, therefore, imperative that Binariang GSM’s corporate restructuring be completed according to schedule and without deviation from the represented framework to address these concerns,” the ratings agency said.

If the details and timing of the corporate restructuring are not adhered to, and there is no significant improvement in the group’s financials, then its sukuk ratings could suffer from severe downward pressure.

However, Maxis’ position as the largest mobile services provider in Malaysia continues to support the ratings.

“The steady profit performance and cash-generating aptitude of its Malaysian operations, with an annual operating cashflow exceeding RM3bil, offer some degree of earnings stability to the group, thereby moderating the losses of its Indian operations,” RAM Ratings said.

It added that it expects the dividend income from Maxis to assist the group’s ability to service its debt.

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