Orascom Telecom 'B' rating placed on CreditWatch negative on limited liquidity visibility at parent company level

In addition, the 'CCC+' issue rating on the $750m senior unsecured notes issued by Orascom Telecom Finance was also placed on CreditWatch negative.

The CreditWatch placement follows Orascom Telecom's second quarter results presentation, which provided an update on the delayed process of repatriating dividends from its largest cash flow generating operation 96.8%-owned Orascom Telecom Algeria (OTA {not rated}; operating under the brand name Djezzy).

Michael O'Brien, Standard & Poor's credit analyst, said:

"The rating action reflects our concerns over liquidity visibility at the Orascom Telecom parent company level in light of a potential delay in the receipt of substantial dividends from OTA."

O'Brien added, "OTA is the leading mobile operator in Algeria with a subscriber market share of about 64% on June 30, 2009, and is Orascom Telecom's largest cash flow-generating and dividend-paying entity. We believe that any substantial delays in repatriation of expected dividends of over $500m from Algeria could have potential knock-on consequences on liquidity management at Orascom Telecom, where most of the group's rated debt sits."

"After having paid cash dividends of about $93m on August 27, 2009, the delay in receipt of dividends from Algeria could cause liquidity pressures for the substantial investment requirements in newer operations in Orascom Telecom's portfolio such as in Canada, or payment of interest and other cash calls at the parent company level," stated O'Brien.

Algerian tax authorities have so far not provided OTA with a requested certificate that enables dividends resulting from the $580m of profits generated in 2008 to be distributed to Orascom Telecom outside of Algeria.

"We intend to closely monitor the situation regarding repatriation of dividends from Algeria over the coming weeks," said Mr. O'Brien.

To resolve the CreditWatch placement, we could lower the rating by more than one notch if, subject to our review, an extended delay of dividend payments from Algeria were to place undue liquidity pressure on Orascom Telecom at the parent company level. Such pressure could in our view compromise Orascom Telecom's ability to service upcoming maturing facilities, or invest adequately in its portfolio.

On the other hand, confirmation of a timely receipt of dividends from OTA and further clarity on the liquidity prospects and cash flow dynamics at the parent company level over the medium-term could lead to a ratings affirmation.