Moody's upgrades ratings of seven Omani GRIs
Published: 03:05 PM,May 20,2023 | EDITED : 07:05 PM,May 20,2023
Moody's Investors Service, a leading global credit rating agency, has upgraded corporate family ratings of seven government-related issuers (GRIs) domiciled in the Sultanate of Oman to Ba2 from Ba3 and maintained the positive outlooks. The companies are Dhofar Integrated Services Company (DISC), Majan Electric Company (MEC), Mazoon Electric Company (MZEC), Muscat Electricity Distribution Company (MEDC), Oman Electricity Transmission Company (OETC), Nama Power and Water Procurement Company (Nama PWP), and Oman Telecommunications Company (Omantel).
Moody’s said the rating action is a direct consequence of the recent rating action on the Government of Oman where the government bond rating was upgraded to Ba2 from Ba3, while the outlook remains positive.
The upgrade in ratings is a significant development for these government related Omani companies. It will help them access funding at lower costs and enhance their creditworthiness. This will also boost investor confidence and attract foreign investments into Oman's economy.
Moody's has upgraded the ratings of DISC, MJEC, MZEC, MEDC, OETC and Nama PWP due to their significant exposure to the Omani government in the form of subsidies, which closely interlink them with the sovereign rating.
However, their ratings are also supported by a stable and transparent regulatory framework, cost-recovery mechanisms, low business risk profiles, and respective monopoly positions. The positive outlook for these companies is also in line with the positive outlook for the government rating. Moody's considers them GRIs that benefit from strong credit interlinkages with the Government of Oman.
Meanwhile, Moody’s has upgraded Omantel’s credit rating from Ba3 to Ba2 and affirmed the company’s baseline credit assessment (BCA) at Ba3. This reflects the upgrade of the sovereign rating and the company’s status as a government-related issuer. Moody’s expects that Omantel’s credit metrics will improve over the next 12-18 months which could lead to improvement in the BCA.
Omantel’s credit quality is supported by its strong market position in Oman; resilient demand due to the necessity-like consumer spending on telecommunications services; exposure to other Middle Eastern and African markets through ownership in Mobile Telecommunications K.S.C.P. (Zain); and efforts to reduce leverage, particularly by using proceeds from the recent sale and leaseback of assets to reduce debt.
However, the rating also takes into account the company’s high concentration in Oman; increased competition following the entrance of a third mobile operator which has been negatively impacting Omantel’s financial performance and market positioning; and the company’s increased leverage following the acquisition of a stake in Zain in 2017. Moody’s said the positive outlook of Omantel is in line with that of the government. The outlook also incorporates Moody’s expectation that the company will demonstrate resilient financial performance, reduce leverage and improve liquidity over the next 12-18 months.
The upgrades in ratings are expected to have a positive impact on the companies, as they will likely lead to lower borrowing costs and improved investor confidence. The ratings upgrades also reflect the improving economic and financial conditions in Oman, which are expected to continue to improve as the government's efforts to diversify the economy and strengthen its fiscal and external buffers continue.
Moody’s said the rating action is a direct consequence of the recent rating action on the Government of Oman where the government bond rating was upgraded to Ba2 from Ba3, while the outlook remains positive.
The upgrade in ratings is a significant development for these government related Omani companies. It will help them access funding at lower costs and enhance their creditworthiness. This will also boost investor confidence and attract foreign investments into Oman's economy.
Moody's has upgraded the ratings of DISC, MJEC, MZEC, MEDC, OETC and Nama PWP due to their significant exposure to the Omani government in the form of subsidies, which closely interlink them with the sovereign rating.
However, their ratings are also supported by a stable and transparent regulatory framework, cost-recovery mechanisms, low business risk profiles, and respective monopoly positions. The positive outlook for these companies is also in line with the positive outlook for the government rating. Moody's considers them GRIs that benefit from strong credit interlinkages with the Government of Oman.
Meanwhile, Moody’s has upgraded Omantel’s credit rating from Ba3 to Ba2 and affirmed the company’s baseline credit assessment (BCA) at Ba3. This reflects the upgrade of the sovereign rating and the company’s status as a government-related issuer. Moody’s expects that Omantel’s credit metrics will improve over the next 12-18 months which could lead to improvement in the BCA.
Omantel’s credit quality is supported by its strong market position in Oman; resilient demand due to the necessity-like consumer spending on telecommunications services; exposure to other Middle Eastern and African markets through ownership in Mobile Telecommunications K.S.C.P. (Zain); and efforts to reduce leverage, particularly by using proceeds from the recent sale and leaseback of assets to reduce debt.
However, the rating also takes into account the company’s high concentration in Oman; increased competition following the entrance of a third mobile operator which has been negatively impacting Omantel’s financial performance and market positioning; and the company’s increased leverage following the acquisition of a stake in Zain in 2017. Moody’s said the positive outlook of Omantel is in line with that of the government. The outlook also incorporates Moody’s expectation that the company will demonstrate resilient financial performance, reduce leverage and improve liquidity over the next 12-18 months.
The upgrades in ratings are expected to have a positive impact on the companies, as they will likely lead to lower borrowing costs and improved investor confidence. The ratings upgrades also reflect the improving economic and financial conditions in Oman, which are expected to continue to improve as the government's efforts to diversify the economy and strengthen its fiscal and external buffers continue.