Friday, November 20, 2009

Moody Warns Orascom Ratings Could Fall

­Debt ratings agency, Moody's Investors Service has placed Orascom Telecom Holding's ratings on review for possible downgrade. Moody's said that the decision related to an announcement from the Algerian government regarding taxes and penalties alleged to be owing by Orascom Telecom Algeria (OTA) in the amount of approximately US$596.6 million.
Orascom Telecom said that the assessment is unfounded, and the Group intends to take all necessary legal steps to challenge the assessment through all available administrative and judicial channels.
At the same time, Moody's downgraded the Corporate Family Rating (CFR) of Orascom Telecom to B2 from B1, and the rating of the US$750 million senior notes due 2014 issued by Orascom Telecom Finance S.C.A. to Caa1 from B3.
The rating action reflects Moody's view that Orascom's potential inability to repatriate 2009 dividends from OTA (which is the company's primary source of cash inflow) until any resolution with the tax authority, or the payment of US$596.5 million to DGE would put significant pressure on Orascom's already weak liquidity profile. The rating action also factors in the challenging operating and regulatory environment in Algeria, and its impact on Orascom's business and financial risk profile in the medium term, particularly considering that Algerian operations generated 51% of the Group's EBITDA during the first 9 months of 2009.
As part of its review process, Moody's will focus on the company's action plan, including any asset disposal. Moody's aims to conclude the review promptly.
The last rating action on Orascom Telecom was implemented on 23 September 2009, when Moody's downgraded the CFR to B1 from Ba3, with negative outlook, reflecting -- amongst others - Orascom Telecom's current difficulties in repatriating 50% of the 2008 dividends (to the amount of US$257 million) from its subsidiary in Algeria, OTA, until the local tax authority issues a clearance certificate in relation to the tax position of OTA; and the potential negative impact of a delay on Orascom Telecom's liquidity profile, particularly considering the heavy equity investments planned in Canada in Q4 2009 and the debt repayments coming due in 2010.
Moody's understands that if OTA makes the payment of US$596.5 million to the tax authorities, the local tax authority will issue a clearance certificate in relation to the tax position of OTA, which would then allow Orascom to repatriate the remaining 50% of the 2008 dividends (i.e.US$257 million).
Orascom Telecom is a holding company with controlling interests in mobile operators in Asia and Africa. In 2008, the company generated US$5.33 billion in revenue and USD2.38 billion in reported EBITDA, on a consolidated basis

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