CAIRO, Nov 19 (Reuters) - Moody’s downgraded Orascom Telecom Holding’s ORTE.CA ORTEq.L corporate family rating on Thursday to B2 after the company was hit with a $596.6 million tax bill by the Algerian authorities.
The agency placed the international mobile telephone operator’s ratings on review for possible further downgrades, saying the “challenging” Algerian operating environment had added to its medium-term risk profile.
The agency said it also cut the rating on $750 million in senior notes issued by Orascom Telecom Finance, due in 2014, to Caa1 from B3.
Orascom announced the Algerian tax demand late on Monday, saying it was based on an “unfounded and unacceptable allegation” that it did not keep proper accounts in 2005-2008. It promised to take legal steps to challenge the assessment.
The Algerian subsidiary generated 51 percent of Orascom Telecom’s group earnings before interest, taxes, depreciation and amortisation (EBITDA) in the first nine months of 2009, Moody’s said.
Payment of $596.5 million or the firm’s inability to repatriate 2009 dividends until the subsidiary resolved the issue with the authority “would put significant pressure on Orascom’s already weak liquidity profile,” it added.
Orascom said on Monday it was “confident in its ability and experience to mitigate this risk of a possible reduced liquidity position in an efficient manner to meet all its obligations as it did in the past.”
Orascom Telecom’s share price has fallen 17 percent in the three days since the announcement.
Moody’s downgraded Orascom Telecom’s corporate family rating to B1 from Ba3 in September after the Algerian authorities withheld $257 million in its 2008 dividends pending a review of Orascom’s tax position.
The Algerian subsidiary, which operates a mobile network under the brand name Djezzy, has over 14.6 million subscribers in Algeria.
Orascom operates in other emerging economies, including Pakistan and Bangladesh, and has a presence in Zimbabwe and North Korea. It also plans to launch operations in Canada this year. (Writing by Patrick Werr; editing by Jon Loades-Carter)