Moody’s Upgrades Outlook on Helios Towers to Positive
Moody’s Ratings has changed the outlook on Helios Towers and HTA Group, Ltd. to positive from stable. At the same time, Moody’s analysts have affirmed the B1 long term corporate family rating (CFR), the B1-PD probability of default rating (PDR) of Helios Towers and the B1 rating of its $850 million backed senior unsecured notes issued by HTA Group, Ltd. due in 2029.
The rating note said the outlook on Helios Towers was changed to positive from stable, reflecting the company’s ongoing deleveraging efforts, successful transition to generating positive free cash flow and consistently strong operating performance.
As of 2024, Moody’s adjusted debt to EBITDA ratio decreased to 4.8x from 5.0x a year earlier, while the company’s free cash flow generation improved significantly, reaching $14 million compared to an outflow of $81 million a year earlier.
Over the next one to two years, Moody’s analysts anticipate that debt to EBITDA leverage will continue to decline to 3.8x, and free cash flow generation will increase to approximately $100 million annually.
This improvement is expected as the company continues to grow organically, focusing on expanding through profitable build-to-suit projects and enhancing its colocation ratio from currently 2.05x to 2.2x.
Helios Towers has announced it will have capacity for shareholder distributions once its reported net debt to EBITDA leverage reaches approximately 3.0x against 4.0x reported as of 2024, which analysts expect to occur between 2026 and 2027.
“We expect further details on this potential policy to be provided within the next twelve months and expect any updated financial policy to remain prudent, carefully balancing shareholder returns with maintaining adequate credit metrics and liquidity”.
Helios Towers’ rating remains supported by the company’s operations of telecom towers across nine countries in Sub-Saharan Africa and the Middle East, with strong market positions in seven of those countries.
The ratings is also supported by its track record of strong tower and co-location growth resulting in strong Moody’s adjusted EBITDA margin of 51% in 2024; an annuity like contracted cash flow stream underpinned by long term contracts (average remaining contract life of 6.9 years representing $5.1 billion in future revenue) with leading mobile network operators (MNO) that benefit from automatic price escalators for increasing power prices, inflation or foreign currency depreciation.
In addition, the rating benefited from the company’s moderate leverage for the telecom tower industry of 4.8x as of 2024 that we expect to reduce to 4.2x by the end of 2025; and first positive free cash flow generation in 2024, which analysts expect will continue to grow as the company reduces spending on expansion and refocuses on organic growth through colocations.
Moody’s said the rating is constrained by the high risk sovereign environments where the company operates, notably Tanzania and the Democratic Republic of the Congo, which accounted for 37% and 33% of EBITDA, respectively, as of 2024, as well as its mid-tier scale with a tower portfolio of 14,325 sites generating revenue of $792 million for 2024.
The positive outlook reflects the company’s ongoing deleveraging efforts, successful transition to generating positive free cash flow, consistently strong operating performance, as well as good liquidity.
A continued track record of positive free cash flow generation and the establishment of a prudent shareholder distribution policy that continues to balance adequate credit metrics and good liquidity with shareholder returns, would be supportive of an upgrade over the next 12-18 months.
An upgrade would also presume the company’s exposure to sovereign risk does not materially weaken. # Moody’s Upgrades Outlook on Helios Towers to Positive. #Moody’s Upgrades Outlook on Helios Towers to Positive#
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