GCR Ratings (“GCR”) has assigned a national scale long-term Issue rating of AAA(NG) to MTN Nigeria Communications Plc’s N115bn Series 1 (Tranche A & B) Senior Unsecured Bonds. The Outlook on the rating is Stable.
N10.1bn Series 1 (Tranche A) Bonds
Long Term Issue
N104.9bn Series 1 (Tranche B) Bonds
Long Term Issue
The Issuer, MTN Nigeria Communications Plc (“MTN Nigeria” or “the Company”), is the leading telecommunications services provider in Nigeria, accounting for 40% of Nigeria’s GSM subscriber base (as of December 2022). The Company is a subsidiary of MTN International (Mauritius) Limited, with the ultimate parent company being South Africa-based MTN Group. MTN Group has developed into a leading regional cellular telecommunication services provider, with a subscriber base of over 250 million across 21 countries in Africa and the Middle East. MTN Nigeria is considered operationally integral to the Group, accounting for around 36% and 43% of revenue and EBITDA respectively during 1H 2022.
In June 2022, GCR affirmed the national scale long-term and short-term Issuer ratings of AAA(NG) and A1+(NG) respectively accorded to MTN Nigeria, with a Stable Outlook. The ratings reflect the Issuer’s strong competitive position, robust financial profile as well as strong group support.
The Issuer registered a new N200bn Bond Issuance Programme (“the Programme”) with the Securities and Exchange Commission in September 2022, and subsequently raised N115bn in Series 1 Senior Unsecured Bonds Issue under the Programme, in the following tranches:
- N10.1bn 13.5% Tranche A, with a tenor of four (4) years, and maturity date of 30 September 2026
- N104.9bn 14.5% Tranche B, with a tenor of ten (10) years, and maturity date of 30 September 2032
While Tranche A Bonds shall be repaid by bullet redemption on the 48th month, Tranche B Bonds shall have a six (6) – year moratorium on principal repayment from the issue date. Following the expiration of the moratorium, principal redemption shall be payable annually, amortising over four (4) equal annual instalments. However, interest will accrue from the issue date and will be payable semi-annually in arrears for both tranches. The Series 1 Bonds shall be direct, unsecured, senior and unconditional obligations of the Issuer and shall rank pari-passu among themselves and equally with other existing senior unsecured obligations of the Issuer. The proceeds is being utilised to finance network expansion, 5G roll-out, lease rentals and working capital.
The Programme Trust Deed does not offer Series 1 Bondholders any security over assets but does feature a negative pledge and other covenants to protect the interest of Bondholders.
Despite the additional debt uptake of N115bn, the Company’s credit protection metrics remained solid per 9M 2022 results. GCR expects MTN Nigeria to continue to demonstrate strong financial flexibility, with a satisfactory covenant headroom. However, pressure could result from higher CAPEX costs amid foreign exchange illiquidity, further Naira devaluation and sustained aggressive infrastructure rollout.
Being senior unsecured debt, the Series 1 Bonds rank pari passu with all other senior unsecured creditors of MTN Nigeria. As such, the Series 1 Bonds will bear the same national scale long-term rating as the Issuer’s. Accordingly, any change in MTN Nigeria’s long term Issuer rating would impact the Bonds rating.
The Stable Outlook reflects GCR’s expectation of sustained strong earnings and cash flow performance, which should support MTN Nigeria’s liquidity and leverage positions.
Given that the Series 1 Bonds rating is intrinsically linked to the Issuer’s long-term corporate rating, any change in the rating assigned to the Issuer would affect the Bonds rating.
MTN Nigeria Communications Plc’s Series 1 (Tranche A and B) Senior Unsecured Bonds
N10.1bn Series 1 (Tranche A) Bonds- LT Issue
N104.9bn Series 1 (Tranche B) Bonds- LT Issue
Salient Points of Accorded Ratings
GCR affirms that a.) no part of the rating process was influenced by any other business activities of the credit rating agency; b.) the rating was based solely on the merits of the rated entity, security or financial instrument being rated; and c.) such rating was an independent evaluation of the risks and merits of the rated entity, security or financial instrument.
The credit rating has been disclosed to MTN Nigeria Communications Plc and the Transaction Arrangers. The rating above was solicited by, or on behalf of, the rated entity, and therefore, GCR has been compensated for the provision of the rating.
MTN Nigeria Communications Plc and the Arrangers participated in the rating process via tele-conferences and other written correspondence. Furthermore, the quality of information received was considered adequate and has been independently verified where possible. The information received from MTN Nigeria Communications Plc and other reliable third parties to accord the credit rating included:
- 2021 audited annual financial statement, and prior four years annual financial statements,
- Management accounts for the period to 30 September 2022,
- Executed Shelf Prospectus,
- Executed Programme Trust Deed,
- Executed Series 1 Pricing Supplements,
- Executed Series 1 Trust Deeds.