Buyback Offer Spurs Bharti Airtel’s Dollar-Denominated Bonds To 5-Year High

Moody’s Investors Service placed the company’s Baa3 rating on review for a cut to junk grade on November 8 on concern about weak cash flow generation.

Bharti Airtel Ltd.’s dollar-denominated bonds due in 2023 surged the most in five years after the company offered to buy back the securities at above the market price amid the risk of a rating downgrade.

India’s second-biggest mobile phone carrier will pay $985 per $1,000 principal amount plus accrued interest for any or all of the $1.5 billion of March 2023 notes in the tender offer, according to a company filing over the weekend. The bonds jumped 2.3 cents to 98 cents on the dollar as of 9:00 a.m. in Singapore Monday, paring their loss for the year to 8 cents.

The review also reflects Bharti Airtel’s low levels of profitability, particularly from its operations in India and higher debt levels to fund capital spending, the rating company said.

Analysts at Bank of America Corp. and Wells Fargo had earlier flagged the risk of the company slipping into junk category, citing debt levels and stiff competition in local markets. Bharti has raised more than $1.5 billion from asset sales, including a partial stake sale in its Africa business, to lighten its debt load, the company said.

Stiff Competition

A price war for customers has only worsened since upstart Reliance Jio Infocomm Ltd. debuted with free services in 2016, a knock-out blow for several smaller carriers that were forced to quit the business or merge. Bharti slipped to No. 2 last quarter, overtaken by a merger between Idea Cellular Ltd. and the local unit of Vodafone Group Plc.

The buyback offer for the 2023 notes will expire at 5 p.m. New York time on November 21 unless extended or terminated earlier, according to the filing.

Bharti hired Barclays Bank, BNP Paribas, Merrill Lynch International and Standard Chartered Bank as joint dealer managers for the tender offer, and appointed D.F. King as the information and tender agent. – Business Standard