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Bharti Airtel to test bond buyer views on debt cut push

The wireless carrier is planning to sell a dollar perpetual bond as early as October 8.

Bloomberg|
Oct 04, 2019, 11.34 AM IST
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By Denise Wee

International bond investors may get a chance in coming days to weigh in on Indian wireless carrier Bharti Airtel’s efforts to pare debt, with market signs indicating enthusiasm for the push.

The wireless carrier is planning to sell a dollar perpetual bond -- debt with no set maturity -- as early as Oct. 8, according to a person familiar with the matter. Its existing dollar notes due 2025 have rallied to a three-year high of 104 cents, after the company said last month it plans to retire a substantial part of its debt by utilizing proceeds from the IPO of its Africa unit.

Still, investors will be weighing risks in what would be the first corporate dollar perpetual out of India since 2013. India’s three big wireless carriers have been locked in a brutal price war, leading to mounting debts and declines in subscribers for Bharti Airtel and Vodafone Idea. Upstart Reliance Jio Infocomm has been offering lower data tariffs and is in position to take advantage of intensifying competition, India Ratings and Research has said.

“Fallen angel risk has been reduced due to asset sales and equity raising,” said Owen Gallimore, head of credit strategy at Australia & New Zealand Banking Group. “But the main risk is bond investors not being adequately compensated for the risks of buying into a perpetual.”

S&P Global Ratings expects Bharti Airtel’s leverage to remain elevated over the next six to nine months, and its negative outlook reflects a one-in-three possibility that it may downgrade the company over that period. It rates the firm at the lowest investment-grade ranking of BBB-. The company was cut to junk by Moody’s Investors Service earlier this year.

Bharti Airtel, controlled by tycoon Sunil Mittal, has allayed some concerns by boosting its cash levels with the completion of a rights offering in India and with the initial public offering of its African unit.
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