Fitch Ratings has affirmed the long-term issuer default rating (IDR) of the pioneer of tower infrastructure sharing in Africa, Helios Towers Nigeria Limited’s (HTN), at ‘B’ with a stable outlook, following its planned acquisition by IHS Holding Limited (IHS).
The global rating agency explained in a statement yesterday that it anticipates that the acquisition would lead to a stronger market position in Nigeria for the enlarged entity, saying that it does not expect the HTN ratings to be downgraded as a result of the transaction.
According to Fitch, HTN’s operating and financial performance results for nine months ending September 2015 showed good progress in-line with its forecasts.
“We also do not expect HTN’s rating to be affected if Fitch’s Nigerian sovereign rating (BB-/Negative) is downgraded by one notch to ‘B+’, as long as HTN’s cash flow generation remains robust and liquidity remains intact,” it added.
IHS plans to buy the entire issued share capital of HTN from HTN Towers Plc, which is ultimately owned by HTN’s current shareholders including Helios Investment Partners.
IHS is a private company, operating 22,600 towers in Cameroon, Cote d’Ivoire, Nigeria, Rwanda and Zambia. It is significantly larger than HTN, which operates 1,212 towers, all in Nigeria. According to the companies, the net leverage position of the combined entity is likely to be approximately 50 per cent lower than HTN’s current leverage.
“This transaction strengthens IHS’s position as the leading tower company in Nigeria. IHS believes combining its operations with HTN’s in Nigeria would result in meaningful synergies. Impact on HTN Bondholders IHS says it is committed to maintaining the existing relationship and position with HTN’s bondholders,” Fitch added.
According to the documentation for HTN’s $250m senior unsecured bond due in 2019, following a change of control, bondholders have the option to be repaid 101 per cent of par value if at least one rating agency withdraws or downgrades HTN’s rating within 90 days of a change of control. However, the right to a bondholder put ceases once both rating agencies affirm or upgrade HTN’s rating after a change of control.
Fitch added: “As long as HTN’s cash flow generation remains robust and liquidity is intact, we do not expect HTN’s rating to be affected by a downgrade of the Nigerian sovereign rating by one notch to ‘B+’. The impact on HTN from a more severe downgrade of the sovereign would be assessed if it happens.
“Fitch expects HTN to continue growing strongly, in line with the telecommunications market in Nigeria, which is seeing rapidly increasing demand for mobile and broadband. HTN benefits from a visible revenue stream driven by long-term lease agreements, which comprise embedded contractual escalators and, in some cases, cost pass-through mechanisms.”