S&P affirms Batelco ‘BB+/B’ ratings
Outlook stable
DUBAI, June 29: Standard & Poor’s Ratings Services today affirmed its ‘BB+/B’ long- and short-term corporate credit ratings on Bahrain-based telecommunications incumbent Bahrain Telecommunications Co (Batelco). The outlook remains stable.
At the same time, we also affirmed our ‘BB+’ issue ratings on the senior unsecured notes due 2020, issued by Batelco International Finance No.1.
The affirmation reflects continued very low leverage at Batelco, as well as a positive evolution of our financial policy assessment for Batelco, combined with a negative evolution of our comparative rating analysis, based on the fiscal situation of Bahrain (BBB/Negative/A-3), Batelco’s controlling shareholder.
We believe that Batelco has a more clearly articulated acquisition strategy than previously. We do not expect major debt-financed acquisitions that would bring the company’s net adjusted debt to EBITDA substantially beyond 2.0x (in first-quarter 2015, it was 0.6x). We have therefore revised our financial policy assessment to “neutral” from “negative.”
Profile
At the same time, the fiscal profile of Bahrain is weakening, in our view. Aonenotch lowering of the sovereign rating would result in a cap on Batelco’s ratings at ‘BB+’, given the strong link between the company and the sovereign. As a result, we have revised our comparative rating analysis modifier to “negative” from “neutral.”
Constraining Batelco’s business risk profile are its fairly small scale on a global basis, the evolving competitive and regulatory landscape for telecoms in Bahrain, and its exposure to country risk. Offsetting these weaknesses is Batelco’s adequate competitive position in Bahrain’s fixed-line and mobile telephony markets and high margins. The company dominates Bahrain’s fixed-line market, whereas the mobile industry is competitive.
Batelco’s financial risk profile is supported by its currently very low debt leverage and large cash balance. The weak fiscal position of Batelco’s majority shareholder, Bahrain, leads us to expect a continued high dividend payout ratio.
The stable outlook reflects our view that Batelco will maintain its operating performance and that profitability will stabilize at current levels. We assume that the company’s adjusted debt to EBITDA will not substantially exceed 2.0x.
Continued from Page 38 Khaled Abdel Majeed, founder of MENA Capital, an investment manager focusing on the Middle East, drew a parallel with a 1997 attack at Luxor in Egypt that killed over 60 people. Egypt’s tourism sector took two to three years to recover, he said.
A repeat of the 2011 slump would blow a hole of about 1.2 billion dinars ($615 million) in Tunisia’s annual foreign earnings, expanding a current account deficit that totalled 7.39 billion dinars in 2014.
This would not amount to a balance of payments crisis, however. The deficit has been shrinking, by 38 percent year-on-year in the first quarter of 2015, because of rising exports and lower oil prices.
Tunisia is also more able to handle pressure on its balance of payments than it was just a year ago. It has rebuilt net foreign currency assets from 10.39 billion dinars worth 93 days of imports in April 2014 — a level which the central bank governor called “dangerous” — to 13.51 billion
dinars or 117 days, which bankers see as comfortable.
The central bank responded to last year’s foreign reserves crunch by reducing its sales of hard currency and allowing a controlled fall of the dinar, to about 2.0 against the dollar in March this year from around 1.57 in April 2014. By 1415 GMT, the dinar was steady at around 1.95.
The bank may resume its policy of controlled falls if reserves shrink sharply again.
“That would be a reasonable strategy to cope with the situation and make exports cheaper,” said Majeed.
In any case, said Louis, Tunisia could count on the support of allies such as the European Union and the United States if financial pressures on it increased.
However, Tunisia will not avoid pain if, as expected, the foreigners stay away, causing thousands of people to lose their jobs in the coming months.
Tourism directly employs about 228,000 people, providing 7 percent of the country’s jobs and gross domestic product directly, and 15 percent of GDP including wealth generated indirectly, the World Travel and Tourism
Council said.
But with the economy more optimistic in other areas — the International Monetary Fund forecast last month that GDP growth would rise to 3.0 percent this year from 2.3 percent in 2014 — Tunisia may escape recession.
Majeed predicted growth would be flat at 2.0-2.5 percent in 2015.
Continued from Page 38 Kuwait is expected to record its first deficit in16 years in FY15/16 as a result of the decline in the price of oil. Though the parliament has yet to approve the budget, government spending is expected to be lower in FY15/16;most of the cuts should be in items that would leave the outlook for the domestic economy unchanged. In particular, investment spending plans will be largely unchanged.
Brent has recovered somewhat since it bottomed early in 2015, averaging $57 per barrel thus far in 2015. Still, the price remains nearly 40% lower than a year ago. Oil revenues are expected to be 38% lower at KD 13.8billion, producing a deficit of around 4.8% of GDP.
The Kuwaiti dinar (KWD) had strengthened substantially in 2014, as a result of the stronger US dollar; it has since retreated somewhat, though the KWD is still up compared to a year ago. The dinar is pegged to a basket of 4-5 major currencies, with the US dollar having the largest weight among them. The JP Morgan trade-weighted index of the dinar shows the currency up by around 6.2% since May2014, though it retreated around 2.6% from its peak in March 2015.
Kuwait equities have yet to recover following the market’s retreat late last year in the wake of weaker oil prices. The market made an initial but short-lived recovery earlier in 2015.The Kuwait Stock Exchange’s value-weighted index (IXW) was down by 3.9% year-to-date (ytd) in May. Over the same period, the MSCI total return index is down by 2.5% ytd.