Fitch Upgrades XL Axiata's National Ratings & Affs International Ratings

Friday, 27 January 2012 19:32

Written by Hans GN

JAKARTA, Indonesia Today - Fitch Ratings has upgraded PT XL Axiata Tbk's National Long-Term rating and the senior unsecured rating on Rp1.5 trillion of notes due 26 April 2012 to 'AA+(idn) from 'AA(idn)'. The outlook is positive. At the same time, XL Axiata's Long-Term Local- and Foreign-Currency Issuer Default Ratings have been affirmed at 'BB+'. The outlook is positive.

The upgrade of the National ratings reflects a reappraisal of XL Axiata's credit strengths when compared to other Indonesian corporates, and Fitch's revised view that the company warrants the second-highest rating on the Indonesian National rating scale.

The ratings reflect the company's stable financial and operating performance. XL Axiata's FY11 EBITDA margin declined to 49% (FY10: 53%). However, this decline is largely due to one-off costs associated with a restructuring program, which includes outsourcing the network operations and network field operations function to PT Huawei Tech Investment. This process will involve transferring 1,200 employees to Huawei, and incurring severance costs of Rp269 billion.

The Positive Outlook reflects the agency's expectations that the restructuring program will enable the company to meet positive rating guidelines of funds from operations (FFO)-adjusted net leverage below 1x, stronger pre-dividend free cash flows and a greater revenue market share.

Under Fitch's parent and subsidiary methodology, the ratings incorporate a one-notch uplift from their stand-alone level, reflecting implied support from its Malaysian parent, Axiata Group Berhad (AGB) which has a 66.6% beneficial ownership of XL Axiata. The company accounts for 39% and 46% of AGB's consolidated revenue and EBITDA, respectively.

The company has a IDR1.5trn bond due on 26 April 2012. Total cash and equivalents at end-2011 were Rp998 billion, Fitch believes that the company has long-term relationships with several banks that are willing to advance loans to repay the bond. (Indonesia Today)

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Fitch Upgrades XL Axiata's National Ratings & Affs International Ratings

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