Published on 15 February 2013
RAM Ratings has reaffirmed the
respective AA3/P1 and A2 ratings of Binariang GSM Sdn Bhd’s (“BGSM” or “the
Group”) Senior Sukuk and Junior Sukuk. We have maintained the negative outlook
on both long-term ratings. The Senior Sukuk consists of BGSM’s RM19 billion
Islamic Medium-Term Notes Programme and RM2 billion Islamic Commercial Papers
Programme. The Junior Sukuk refers to the Group’s USD900 million Cumulative
Non-Convertible Islamic Junior Sukuk. BGSM is the investment-holding company
with interest in Malaysia’s largest cellular operator, Maxis Berhad (“Maxis”),
and Aircel Limited (“Aircel”) – the seventh-largest mobile operator in India
and PT AXIS Telekom Indonesia – the fifth largest mobile operator in Indonesia.
The rating reaffirmation has
given significant consideration to a proposed corporate restructuring exercise
that aims to bring BGSM’s sukuk holders a step closer to Maxis’ cashflow for
debt servicing and also to enhance its debt-protection covenants. BGSM targets
to complete the restructuring exercise by June 2013. Subject to all the
relevant approvals, this proposed exercise includes the following:
(i)
Establishment of a special-purpose vehicle (“SPV”) that will own the shares in
Maxis
currently
owned by BGSM Group; and
(ii) Exchange
of BGSM’s Islamic Securities with the new Senior and Junior Sukuk to be
issued
by the SPV.
The negative outlook reflects
our continuing concerns on further deterioration of the Group’s financial
metrics, exacerbated 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;
BGSM registered a pre-tax loss for the first time in fiscal 2011 and remained
so in 1H FY Dec 2012. This is expected to continue, thereby affecting the
Group’s near-term profitability and debt-protection measures. It is therefore
imperative that BGSM’s corporate restructuring be completed according to
schedule and without deviation from the represented framework to address these
concerns. The ratings will come under severe downward pressure if the details
and timing of the corporate restructuring are not adhered to, and there is no
significant improvement in the Group’s financial profile.
Meanwhile, the ratings continue
to be supported by Maxis’ position as the largest mobile-services provider in
Malaysia. The steady profit performance and cash-generating aptitude of its
Malaysian operations, with an annual operating cashflow of exceeding RM3
billion, offer some degree of earnings stability to the Group, thereby
moderating the losses of its Indian operations. Going forward, dividend income
from Maxis is expected to anchor the Group’s debt-servicing ability.
Media contact
Lee Chai Len
(603) 7628 1192
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