Recently Liquid Telecom began providing 100G links to the cities of Kigali in Rwanda, Kampala and Tororo in Uganda, and Nairobi and Mombasa in Kenya, with further 100G upgrades planned for the East Africa Fibre Ring in the near future.
The new financing is therefore likely to see improved speeds for its Kenyan fibre-optic offerings.
The firm’s liquidity profile is considered good and is well supported by an unrestricted cash balance of $77 million (Sh7.9 billion).
Global rating agency Moody’s has said the credit rating of Liquid Telecommunications Holdings, which owns a subsidiary in Kenya and other African countries, and that of its senior secured notes will remain unchanged following its proposed Sh18.54 billion ($180 million) increase to the notes due in 2022.
Moody’s Investors Service in its latest notification said the proceeds from the bond issued by Liquid Telecommunications Financing Plc, which is also owned by Liquid Telecom group, will be used to repay Sh14.9 billion ($145 million) of existing bank debt with the balance for general corporate use including future CapEx needs to pursue its fibre expansion strategy across its African markets.
Recently Liquid Telecom began providing 100G links to the cities of Kigali in Rwanda, Kampala and Tororo in Uganda, and Nairobi and Mombasa in Kenya, with further 100G upgrades planned for the East Africa Fibre Ring in the near future.
The new financing is therefore likely to see improved speeds for its Kenyan fibre-optic offerings.
“It (the bond) simplifies the capital structure and improves the group’s liquidity profile by further lengthening its debt maturity profile,” said Moody’s vice president Dion Bate to justify the decision on the credit rating.
The agency said the Mauritius-headquartered Liquid Telecom’s Ba3 CFR (corporate family rating) and Ba3-PD (probability of default rating) reflect the company’s strong market position and competitive advantage.
The ratings also factor the supportive industry dynamics which Liquid Telecom is exposed to given the growing demand for carrier and enterprise broadband services across Africa.
The firm’s liquidity profile is considered good and is well supported by an unrestricted cash balance of $77 million (Sh7.9 billion), positive operating cash flows and a $55 million (Sh5.67 billion) undrawn revolving credit facility (RCF) to support its CapEx rollout for the next two years.
Moody’s said there is sufficient headroom under the maintenance covenants which is expected to remain.
“The stable outlook reflects the strong market position and positive underlying drivers for fibre services demand coming from the increase in data consumption across Africa.
“Furthermore, it captures our expectation that Liquid Telecom’s liquidity profile will remain strong and its operating performance and free cash flow generation will improve as the company integrates the acquisition of Neotel,” said Moody’s.
Moody’s said the firm’s capital investment rollout is prudently managed through its success-based investment strategy which is underpinned by signed contractual agreements.
Its long standing contractual relationships with blue chip customer base as demonstrated by low customer churn rates of around one per cent per month offsets the moderate customer concentration with the top 10 customers contributing 40 per cent to revenues.
The agency said the rating is balanced by Liquid Telecom’s exposure to countries with high geo-political risk and weak institutional strength, where regulatory regimes can be challenging.
However, this is mitigated by the firm’s operating track record in these markets and given that around half of revenues received is in US dollars and held offshore.
Moody’s also recognises the execution risks associated with the integration of Neotel Proprietary Limited (Neotel) and Liquid Telecom’s ability to deliver improved margins and free cash flow generation in order to deleverage.
The firm owns and operates over 50,000 fibre optic route Kilometres across 13 South and East African countries, five data (three of which are “tier 3”) centres and two satellite earth stations.
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