(The following statement was released by the rating agency)
July 19 - Standard & Poor’s Ratings Services today assigned its ‘BBB-’ long-term issue rating to the multi-currency US$1.5 billion equivalent sukuk program of Malaysia-based telecommunications holding company Axiata Group Bhd. (BBB/Positive/--; axA+/--). Axiata Group will issue the program through Axiata SPV2 Bhd.
The issue rating reflects the strength of the transaction documentation, including the lease, wakala, murabaha, and purchase-undertaking agreements. Under these agreements, Axiata Group is obliged to make all payments needed to ensure that the issuer has sufficient funds to pay the certificate holders in a timely manner. Our long-term corporate credit rating on the group forms the basis of our credit assessment of the sukuk program. Axiata SPV2 is a Malaysia-domiciled special purpose vehicle set up and wholly owned by Axiata Group.
Under the terms of the transaction, the issuer will issue sukuk certificates from time to time. Axiata SPV2 will use the issuance proceeds to acquire commodities that it will sell to Axiata Group, rent lease assets from the group, and buy its airtime vouchers and shares. The composition of assets for each series would depend on the individual series issued under the program. Also, the identity of the assets in the series would also be known only at a time of Axiata Group’s determination and when we assign the rating to the individual issuances under the program.
Standard & Poor’s rates this program one notch lower than its rating on Axiata Group to reflect structural subordination because the group operates through an operating subsidiary/holding company structure. We calculate the ratio of priority debt and other liabilities at the holding company level to total assets to be above 20%. Nevertheless, the rating is the same as on the group’s rated senior unsecured notes. This is because the obligations to the sukuk holders would rank pari passu with senior unsecured debt obligations of Axiata Group. This is further substantiated by a cross-default clause on all material external debt obligations of the group.
The rating on Axiata Group reflects the company’s solid cash flow generation, particularly in its stable domestic business, low leverage, and its favorable market positions and diversity across markets. The group’s exposure to political, macroeconomic, and regulatory risks in emerging markets, and the high capital investments and significant competitive pressures associated with these markets offset these strengths. We assess Axiata Group’s stand-alone credit profile at ‘bbb’, in line with our corporate credit rating.
-- 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
-- General Criteria: Standard & Poor’s Approach To Rating Sukuk, Sept. 17, 2007