NEW DELHI : Bharti Airtel Ltd’s Mauritius-based unit Network i2i will raise $250 million through 25-year subordinated perpetual security bonds (PERPS).
The securities, which have been priced on a par at a coupon and yield of 5.650%, will form a single series, Bharti Airtel Ltd said on Wednesday in a BSE filing.
The proposed PERPS will be used to refinance debt, invest in subsidiaries, and for general corporate purposes. Bharti Airtel will stand guarantee to the debt offering.
The parent company has guaranteed 150% of principal initially and 115% of principal, interest payable during the reset period and any outstanding arrears of interest within 15 business days of each reset date. The tenure of the bond is extendable by another 25 years.
S&P Global Ratings has assigned its BB/CreditWatch negative rating to the offering. Fitch has given it BB/Rating Watch Negative. Bharti itself carries S&P’s BBB-/CreditWatch Negative and Fitch’s BBB-/Rating Watch Negative.
“Bharti Airtel’s third-quarter fiscal 2020 (ending March 31, 2020) results were broadly in line with our estimates. We expect revenue growth to accelerate from the fourth quarter of fiscal 2020, as the impact of tariff hikes feeds into financial performance. We expect the company to keep tight control over its capital spending," S&P said in a note on Wednesday.
The global rating agency said it would lower the rating by one notch if it believes Bharti Airtel’s leverage is unlikely to improve beyond 20% by the end of fiscal 2021. Additional DoT liabilities or acquisition-related payouts, or rising risk of sizable 5G spectrum auction without sufficient mitigants could lead to such a scenario, it said.
“We could affirm the ratings if Bharti Airtel’s efforts to withstand the impact of the litigation and other developments help its FFO-to-debt ratio (FFO is funds from operations) to recover well above 20% by the end of fiscal 2021. Significant relief from the DoT or the Supreme Court could result in such a scenario," S&P said. Bharti Airtel reported a net loss of ₹1,035 crore in the December quarter compared to a profit of ₹86 crore in the year-ago period, as the company set aside funds to pay adjusted gross revenue dues to the government in compliance with a Supreme Court ruling.
The company’s consolidated revenue from operations rose by 8.5% to ₹21,947 crore during the October-December quarter.
The Supreme Court in a 24 October order upheld the DoT’s definition of revenue, which defined AGR as all revenues of a licence holder including those from non-core telecom operations such as rent, dividend and interest income. Both Airtel and Vodafone missed the 23 January deadline to pay the AGR dues and filed a modification plea seeking an extension from the apex court. While the SC has agreed to hear the modification pleas, the DoT said that it won’t take any coercive action against mobile service providers.
