Nomura’s credit bureau analyst Eric Lui said the price reset would only have a “limited impact on [NBN Co’s] bonds, given that from a credit perspective, its rating is mainly supported by the expectation of government support”.
NBN Co has approximately $24.7 billion in debt on its books. Yet he repaid via bank facilities and bond debt, taking his original loan from $19.5 billion to $6.4 billion at the end of June.
It is unclear how much the new four-year bond offering would seek to raise.
Credit rating agency Fitch has the investment profile of NBN Co with an AA rating. Moody’s Investor Services has a similar rating for NBN Co – A1.
Moving away from “credit positive” privatization
Mr Lui said Moody’s rating was six notches above NBN Co’s standalone credit rating of BA1, with any new ratings more dependent on “any idea of potential privatization (which seems unlikely… in the short term). term)”.
As part of the price reset, Communications Minister Michelle Rowland said NBN Co’s previous proposal included unrealistic revenue expectations, reflecting a view of privatization that was no longer relevant.
Moody’s vice chairman and chief credit officer Ian Chitterer said the move away from privatization was “credit positive” for NBN Co.
“The key issue…is government support. Although the company’s standalone credit profile is improving, it is still at a high level of yield, and what bondholders have been buying is government support,” he said. declared.
“While changes to NBN’s business model may mean it will take a little longer to achieve a standalone investment grade credit profile, overall credit risk will remain underpinned by government support.”
The revamped pricing proposal – known as the Special Access Commitment – is still undergoing industry consultation with the Australian Competition and Consumer Commission, before NBN Co submits a final proposal in october.
NBN Co increased revenue 10% to $5.1 billion in fiscal 2022. Earnings before interest, taxes, depreciation and amortization more than doubled to $3.1 billion.
The company forecast revenue to reach between $5.2 billion and $5.4 billion in fiscal 2023, and EBITDA between $3.4 billion and $3.6 billion.