MTN rating cut to junk
Ratings agency S&P Global has cut MTN’s long-term credit rating to junk status, with a stable outlook.
The cut follows a downgrade in Nigeria’s credit in mid-September, where S&P lowered its long-term ratings on Nigeria to ‘B’ from ‘B+’ on weak growth dynamics, with a stable outlook.
The sovereign downgrade reflects increased risk for MTN Group, as MTN Nigeria is a significant contributor to the Group, MTN said.
On review of MTN’s ratings, S&P lowered the Group’s long-term corporate credit rating to ‘BB+’ from ‘BBB-‘ as well as its South Africa national scale rating to ‘zaA+’ from ‘zaAA’.
Junk status is a sub-investment grade which makes borrowing costs significantly higher. The label also bars certain investors and hedge funds from buying into junk companies as part of their policies.
S&P maintains a cap of two notches above the blended sovereign rating of Nigeria and South Africa which is currently ‘BB-‘.
MTN is expected to face further pressure as South Africa’s sovereign rating comes under review later in 2016, with the current projection being that S&P will also cut the country to junk status.
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