S&P affirms Ooredoo’s ‘A-’ rating
12 Jan 2016 - 1:51
DOHA: Standard & Poor’s Ratings Services yesterday affirmed its ‘A-‘ long-term corporate credit rating on Ooredoo QSC.
The outlook remains stable.
At the same time, the ratings agency corrected an error on its short-term corporate credit rating on Ooredoo by lowering the rating to ‘A-2’ from ‘A-1’. “In accordance with our criteria, we should have lowered the rating on February 3, 2014, when we lowered the long-term rating to ‘A-‘ from ‘A’,” the rating agency said.
“Ooredoo now has significant cash balances and a comfortable debt maturity profile, leading us to revise our liquidity assessment to strong, from adequate. At the same time, our reassessment of the company’s competitive position as strong rather than satisfactory reflects our expectation of more stable profitability in the future.”
“A further important driver of both reassessments is our expectation that Ooredoo will make no major acquisition outlays in the coming 24 months,” the rating agency said. “We estimate that Ooredoo’s ratio of liquidity sources to liquidity uses will comfortably exceed 1.5x and 1.0x for next 12 months and 24 months, respectively,” it said.
The stable outlook reflects S&P’s expectation that the group’s operating performance will not be markedly weaker than its base-case projections and that the Standard & Poor’s-adjusted debt-to-EBITDA ratio for the company will remain lower than 3x.
It assumes that Ooredoo will focus on organic growth across its portfolio of assets and avoid sizable acquisitions that would significantly increase its adjusted debt. S&P might lower the ratings on Ooredoo, if its Standard & Poor’s-adjusted leverage (debt to EBITDA) ratio were to exceed 3x, due for example to underperformance, financial policy decisions, or large debt-funded acquisitions.
A significant reduction in the Qatari state’s shareholding in Ooredoo and a consequent review of our assessment of the company as a government-related entity could also lead to a downgrade of up to three notches, although we do not see this as likely at this stage.
“We could raise the ratings on Ooredoo if the company reduced its Standard & Poor’s-adjusted leverage to about 2x or it generated consistent and strong positive free cash flow. An upgrade would also be conditional upon stabilisation of operating conditions in key markets, including Iraq”, the ratings agency noted.