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Saturday, September 18, 2004
Sept 17, 2004 (AXcess News) Bucharest - Standard & Poor's Ratings Services said it had raised its long-term corporate credit ratings on Romanian wireless operator MobiFon Holdings B.V. and its parent Telesystem International Wireless Inc. (NASDAQ: TIWI, TSX: TIW) to 'B+' from 'B-'.
At the same time, Standard & Poor's affirmed the 'B-' ratings on MobiFon Holdings' US$225 million senior unsecured notes due July 2010. TIW owns 99.99% of MobiFon Holdings, which in turn owns 79% of MobiFon S.A. (MobiFon Holdings and MobiFon S.A. are collectively referred to as MobiFon). The outlook is stable.
The ratings reflect the completed transaction by TIW whereby MobiFon Holdings increased its ownership interest in MobiFon S.A. to 79% from 63.5%.
The ratings further reflect the improving credit quality of MobiFon. This is a materially relevant ownership threshold for the company, as the MobiFon S.A. statutes require a supermajority approval of shareholders (75%) for certain material financial changes. At the previous ownership level of 63.5%, MobiFon Holdings was not able to unilaterally control or access MobiFon; the default risk of MobiFon Holdings was previously considered separate from that of MobiFon, and MobiFon Holdings was therefore rated on a stand-alone basis. "Because MobiFon Holdings now has substantive control over MobiFon, the default risk on both entities is considered the same, and the credit profile reflects that of the consolidated company," said Standard & Poor's credit analyst Joe Morin.
"Furthermore, the improving credit quality at MobiFon is underpinned by an improving macroeconomic environment in Romania (BB/Positive/B), the company's growing subscriber base, and increasing revenues and EBITDA," Morin added.
The 'B-' rating on the US$225 million senior secured notes on MobiFon Holdings reflects its structural subordination to the senior secured credit facility at the operating company level. The 'B+' long-term corporate credit rating on TIW is also equalized with the corporate credit rating on MobiFon Holdings. Although TIW currently has a substantial cash balance, has no debt, and only modest corporate overhead expenses, the company is still dependent on dividends from MobiFon Holdings for its long-term cash needs. TIW's other wireless operating subsidiary, 27%-owned TIW Czech NV, is credit neutral to the ratings on TIW. TIW Czech is not expected to be in a position to provide dividends for several years. Then again, TIW Czech has no recourse to TIW, and therefore the default risk at TIW (and MobiFon) is delinked from TIW Czech.
The stable outlook reflects our expectations that MobiFon will maintain its competitive position within a growing wireless industry in Romania, and that the political and macroeconomic environments in Romania will remain stable or improve in the long term.
TIWI closed down 9 cents Friday to end the week at $9.61US.
Posted by Mihai Botea : 9/18/2004 04:20:00 pm
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