Moody’s rates Singtel’s proposed US dollar notes at A1, with negative outlook

Singtel retail outlet at Tiong Bahru PlazaSingtel retail outlet at Tiong Bahru Plaza

Moody’s Investors Service assigned Singtel Group Treasury’s (SGT) proposed 10-year U.S.dollar benchmark notes an A1 rating with a negative outlook, the ratings agency said Tuesday.

The notes will be issued under SGT’s S$10 billion euro medium-term note program, with the proceeds earmarked for refinancing and general corporate purposes, Moody’s said in a statement.

“We expect Singtel will use all of the bond proceeds to refinance maturing debt, and as such impact on leverage will be neutral,” Nidhi Dhruv, a Moody’s senior analyst and the lead analyst for Singtel, said in the statement. “This bond issue will also help to extend Singtel’s debt maturity profile and further strengthen its liquidity position.”

Moody’s said Singtel has around S$3.1 billion in debt, including lease liabilities, maturing over the next 12 months, but the ratings agency considered the refinancing risk “manageable” because the telco has strong access to bank and bond markets.

An A1 rating indicates obligations are considered “upper-medium grade” and subject to low credit risk, with the issuer having a superior ability to repay, according to Moody’s ratings scale.

But the negative outlook on the proposed bonds is due to Singtel’s weak credit metrics for the A1 rating level, Moody’s said.

“We do not expect a meaningful improvement in Singtel’s underlying EBITDA over the next 12-18 months, as intense price competition in Singapore and Australia is leading to lower average revenue per user (ARPU) and declining profitability in both markets,” Dhruv said.

EBITDA stands for earnings before interest, tax, depreciation and amortization.

SGT has an unconditional guarantee from Singtel, which is also rated A1, Moody’s said.

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