S&P rates Prosus notes BBB-

S&P said it assigned its BBB- long-term issue rating to Prosus NV’s new $1.25 billion 3.68% senior unsecured notes due 2030. This is the first drawdown under the company’s $6 billion global medium-term note program, which S&P rates BBB-.

Prosus intends to use the proceeds for general corporate purposes and to refinance its $1 billion 6% unsecured publicly traded bond maturing in July 2020. The company also signaled its intention to exercise the make-whole option available under the 2020 notes for the redemption.

“We rate the company’s debt BBB-, the same as the issuer credit rating, because no significant elements of subordination risk are present in the capital structure. Unlike the existing $3.2 billion in debt, the new issue does not include a guarantee from Naspers Ltd., Prosus’ ultimate parent. However, this does not affect the rating because over 98% of the historical Naspers’ group portfolio value is held through Prosus,” S&P said in a press release.

The new issue does not change S&P’s view of the company’s overall credit quality. Prosus will use proceeds primarily to refinance debt, so the transaction is largely leverage neutral.

“We expect the company will maintain S&P Global Ratings-adjusted credit metrics near current levels, with a loan-to-value ratio well below the 15% leverage tolerance at the current rating, and cash flow coverage of at least 2x. We expect the lower interest rate on the new debt to support Prosus’ liquidity and cash flow coverage,” the agency said.

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