Moody’s Investors Service on Wednesday revised the ratings outlook for Singtel Optus and Optus Finance to negative, saying Singtel’s weaker financial profile may affect its ability to support the two.
On Tuesday, Moody’s cut its outlook for Singtel’s A1 rating to negative from stable, pointing to the Singapore telco’s increased leverage and weaker earnings outlook.
Singtel owns all of Australian telco Optus, which is the parent of Optus Finance; Moody’s said the two get a two-notch uplift to their ratings due to Singtel’s ownership, on the expectation the Singapore telco will provide credit support in the event of financial stress.
In response, Singtel said, “Optus remains financially disciplined and committed to maintaining an investment-grade credit ratings.”
Moody’s affirmed Optus’ A2 issuer rating and Optus Finance’s backed senior unsecured rating of A2.
“Moody’s may downgrade the ratings of Optus and Optus Finance if the implied support from Singtel is reduced, or if Singtel’s credit rating is downgraded, or there is a weakening of Optus’ financial profile due to increased dividend payments to Singtel,” the ratings agency said in the statement.
It added that if EBITDA, or earnings before interest, tax, depreciation and amortization, falls and results in debt-to-EBITDA exceeding 2.2 times, that could also spur a downgrade.