RAM Ratings analyses Maxis Broadband's Unrated Sukuk Murabahah Programme

RAM Ratings says that the Unrated Sukuk Murabahah Programme (New Sukuk) with a nominal value of up to RM10 billion over a tenure of up to 30 years by Maxis Broadband – a subsidiary of Maxis – is so far credit-neutral on the AA3/Stable rating of BGSM Management’s existing Islamic medium term notes (IMTN) Programme of up to RM10 billion in nominal value (2013/2043).

Post Maxis’ internal reorganisation exercise, Maxis Broadband intends to utilise the proceeds of the New Sukuk to part finance the purchase consideration of the businesses and undertakings, including relevant assets and liabilities from Maxis’ other wholly-owned subsidiaries, capital expenditure, working capital requirements and/or other general funding requirements and general corporate purposes as well as refinancing of other debt/ financing obligations and any maturing sukuk under the New Sukuk Programme. Ultimately, BGSM Management’s cumulative debts are expected to remain unchanged and hence these developments are not expected to have any material impact on the gearing of Maxis, RAM Ratings says. 

Maxis is the sole subsidiary of BGSM Management and also the latter’s key source of cashflow. Maxis’ debt load has been increasing through the years on the back of its hefty capex requirements and dividend payouts. As at end-March 2016, Maxis’ gearing ratio stood at 2.10 times while the combined debts of Maxis and BGSM Management came up to RM15 billion. As such, further aggressive leveraging by Maxis could reduce its ability to support the Group’s credit metrics.

RAM does not discount the possibility of additional capex and working capital, pending further details on spectrum assignment fees by the Malaysian Communications and Multimedia Commission, the company added. 

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Zain Group leverages on US$250 million murabaha facility for operations and expansion

The Zain Group, a pioneer of mobile telecommunications in eight markets across the Middle East and Africa, has secured a US$250 million four-year murabaha facility from a syndicate of financial institutions led by Kuwait-based Boubyan Bank and with the participation of Kuwait International Bank and Qatar Islamic Bank. The murabaha facility will be used to meet Zain Group’s operational and expansion financing needs. 

Source: Zain Group. Guggenheimer.

Zain Group CEO Scott Gegenheimer commented: "This murabaha agreement at these preferential terms underscores the Group's success in adopting a policy of prudent borrowing to finance general corporate needs. The contract strengthens our relations with the Islamic banking community, taking advantage of the sector’s facilities. It also comes in the context of our fiscal policy in which we seek to diversify sources of funding."

Deputy Chairman and CEO of Boubyan Bank, Adel Abdul-Wahab Al-Majed said, "This agreement marks a clear message on the ability of Kuwaiti banks and their commitment to supporting corporate entities with strong operational performance and robust strategies, while at the same time contributing to the development of the national economy.

“Many ground-breaking developments in Boubyan Bank in recent years has earned us a reputation as a leading player in the Islamic finance sector in Kuwait, earning the confidence of major companies, including Zain."

In recent years Zain has invested heavily in upgrading its mobile networks and in rolling out new services across all its operations taking advantage of the boom in the mobile sector, specifically in the ever-increasing demand for efficient broadband services.

Most recently, the company introduced 4G LTE superfast broadband services to several key markets, namely Kuwait, Saudi Arabia and Bahrain as well as extensively upgrading and expanding 3G networks in Jordan, Sudan and South Sudan. 

In Iraq, the network has been upgraded with a Single-radio access network (RAN), allowing the operator to offer broadband services once the 3G licence has been granted. Additionally, Zain Iraq is aggressively expanding its network and rolling out commercial services in the more affluent northern region of the country.