Moodys upgrades MNC Sky Vision to B1; outlook stable

IQPlus - Moody's Investor's Service has upgraded the corporate family rating of P.T. MNC Sky Vision to B1 from B2. The outlook on the rating is stable.

The rating action follows the redemption of Sky Vision's USD165 million 12.75%, 2015 senior secured bonds on 12 December 2013. The redemption was funded with a USD 250 million, three-year syndicated loan which was signed in November 2013.

"The refinancing exercise not only extended Sky Vision's debt maturity profile by one year, but the incremental increase in debt also provides additional capital to support the capex and working capital needs associated with Sky Vision's organic growth over the next few years," says Annalisa Di Chiara, a Moody's Vice President and Senior Analyst.

"In addition, interest on the term loan of LIBOR +425bp will reduce Sky Vision's funding costs considerably, helping to bolster cash flows. The decline in interest costs will also help offset some of the effect of the currency mismatch between its Rupiah-based revenues and USD-denominated interest costs," adds Di Chiara, also Moody's Lead Analyst for Sky Vision. 

"The upgrade also reflects Sky Vision's continued strong operating performance, as demonstrated by its year-on-year subscriber growth of 37% in the first nine months of 2013 and its leading position in the domestic pay-TV market with its market share remaining above 70%. Given the significant level of under-penetration in its domestic market, we believe Sky Vision is well-positioned for robust organic growth over the medium to long term, and expect EBITDA margins to remain in the 40% range," adds Di Chiara.

In addition, Sky Vision's credit metrics are well positioned for its B1 rating, and even with its increased debt burden, the company should maintain adjusted debt/EBITDA below 2.5x. Furthermore, the decrease in interest costs will provide significant cash flow benefits and improve its interest coverage ratio from the current 5.5x range.

The rating also continues to reflect the company's small revenue base, the competitive headwinds it will face as other operators increase investment in pay-tv services, satellite operation risks and exposure to foreign currency volatility.

The stable outlook reflects our expectation that Sky Vision's leading market share and product offering will continue to support significant organic growth over the next 12-18 months, and support EBITDA margins in the 40% range.