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Millicom and Comcel's ratings under review following Bribery Allegations

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Moody's has placed Millicom's and Comcel's ratings on review for downgrade following Millicom s announcement that it has reported to law enforcement authorities in the United States and Sweden potential improper payments made on behalf of its joint venture in Guatemala.

Millicom also disclosed that it has hired an international law firm, Covington & Burling LLP, to conduct independent investigations on the matter, with the support of Millicom's management team.

At this time, there is very little additional information made available by the companies and, therefore, it is difficult to estimate the timing and the legal outcome of the investigation, or the size of potential monetary penalties.

Accordingly, Moody's said that its review will be centered in gathering more information about the disclosed potential improper payments and overall investigation, as well as analyzing potential economic impacts for the companies and estimating the potential respective negative impacts for their credit metrics and liquidity. Currently, both Comcel and Millicom have enough liquidity to cover their short term obligations, but cushion for the coverage of fines would depend on the underlying amounts involved. The debt ratings agency added that it considers, however, that potential penalties could be lowered by Millicomīs decision of voluntarily self-reporting its findings.

In addition to monetary penalties, Moody's also sees increased reputational risk for both companies, which could impact investors sentiment and limit their access to funding. Moreover, the ratings review will also assess whether current operating licenses and/or spectrum rights would be impacted. If the resolution of the investigation considers that allegations are true, there could be a spillover effect over its well-regarded Tigo brand, which is used by the group across the LATAM region. Additionally, Moody's could expect regulatory scrutiny to increase towards both companies.

To the extent that they consider that potential economic penalties could be substantial with significant impact in credit metrics and in Comcelīs ability to upstream dividends, a multiple notch downgrade could be considered. according to the estimated impact under Moody's scenarios analysis.

On the other hand, if matters are clarified and resolved with limited or manageable implications to the companies' domestic and international businesses and to their liquidity profile, the ratings could be stabilized.

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Tags: millicom  comcel  Guatemala