Friday, December 17, 2010

S&P upgrades Axiata Group, earnings underpinned by XL Axiata

KUALA LUMPUR: Standard & Poor's Ratings Services has had raised its long-term corporate credit rating on Axiata Group Bhd to 'BBB+' from 'BBB'. The outlook is stable.

'We also raised our ASEAN scale rating on Axiata to 'axA+' from 'axA'. At the same time, we raised our issue rating on the US$300 million senior unsecured notes issued by Axiata SPV 1 (Labuan) Ltd to 'BBB' from 'BBB-'. These notes are unconditionally and irrevocably guaranteed by Axiata,' said the international ratings agency on Friday, Dec 17.

S&P said it raised the rating on Axiata to reflect the improvement in the company's cash flow protection measures and financial metrics.

The solid performances of its core subsidiaries, particularly PT XL Axiata Tbk. (XL; BB/Stable/--), in 2010 underpin the improvement.

For the 12 months to September 2010, Axiata's ratio of adjusted gross debt to EBITDA was 1.7 times, better than our expectation of 2.2 times to 2.5 times at the beginning of 2010.'' S&P said it now anticipated this ratio at 1.7 times to 1.9 times for full-year 2010.

'Axiata's strong overall earning performance is largely attributable to XL," said Standard & Poor's credit analyst Allan Redimerio.

"We attribute XL's strong performance to the initiatives taken by the company in 2009, and the stable competitive environment in Indonesia over the past 12 months."

The performance of Axiata's subsidiaries in Sri Lanka (Dialog Axiata PLC) and Bangladesh (Robi Axiata Ltd) continues to strengthen primarily due to improving economic conditions and favorable industry factors.

In addition, cash flows and margins remained stable at Axiata's Malaysian subsidiary Celcom Axiata Bhd.

S&P said its issuer rating on Axiata is one notch above the company's stand-alone credit profile, which we assess at 'bbb'.

In its opinion, there was a 'moderate" likelihood that the Malaysian government'' (foreign currency A-/Stable/A-2; local currency A+/Stable/A-1; ASEAN scale axAAA/axA-1+) primarily through its investment holding arm, Khazanah Nasional Bhd, would provide timely and sufficient extraordinary support to Axiata in the event of financial distress.

S&P said its issue rating on the senior secured notes is one notch lower than the rating on Axiata to reflect structural subordination because the company operates through an operating subsidiary/holding company structure.

Axiata's liquidity position is adequate, in our view. As at Sept 30, 2010, Axiata had a cash balance of RM5.90 billion. This was sufficient to cover debts maturing over the next 12 months of about RM1.05 billion and expected capital expenditure of approximately RM3.5 billion in 2011.

The stable outlook reflected its expectations that Axiata would maintain its operating performance and cash flows.

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