Assesses business risk profile vulnerable
The international rating agency Standard & Poor’s on Monday gave mobile operator Banglalink a rating of B+ in long-term corporate credit rating with a stable outlook.
The S&P, however, observed Banglalink’s business risk profile was vulnerable because of its local market dependency and Bangladesh’s low economic development and weak financial system.
It also gave a B+ long-term rating to the company’s proposed US$ 300 million fund raising for five years from the foreign investors.
Banglalink, owned by Norwegian-Russian telecom firm Vimpelcom, in last September applied to Bangladesh Securities and Exchange Commission for issuing bonds worth US$ 300 million for expanding its network.
Banglalink is the first company registered in Bangladesh to have rated by S&P. The rating agency is also appointed by the government to rate the country’s economy.
‘The rating of Banglalink reflects our view that the company faces very high country risk, high competition in its cellular business, and high capital expenditure requirements,’ S&P’s credit analyst Wee Khim Loy said in a statement.
‘At the same time, the rating reflects our view of the company’s satisfactory market position and operating efficiency, fair financial position, and support from its ultimate parent, VimpelCom Ltd,’ he said.
‘We view Banglalink’s business risk profile as “vulnerable” because the company generates most of its cash flows in the domestic market. The company’s exposure to Bangladesh’s very high country risk reflects the country’s low level of economic development and weak financial system. Banglalink is also exposed to high regulatory risk. Both these factors have undermined the company’s operating performance over the past 15-18 months,’ said the statement.
The S&P assessed Banglalink’s capital structure as negative due to its exposure to currency risk from a possible weakening of the Bangladesh Taka.
‘The company will have at least 60 per cent of its debt denominated in foreign currency after the proposed bond issuance, whereas most of the company’s cash flows are in local currency. Banglalink also does not have any hedges to offset the currency risk,’ it said.
-With New Age input
