Standard & Poor's Ratings Services said on Tuesday that its rating on Pakistan Mobile Communications Ltd (Mobilink; B-/Stable/-) is not immediately affected by the placement of the 'B' rating on its parent, Orascom Telecom Holdings S.A.E. (Orascom Telecom), on CreditWatch with negative implications.
The Creditwatch placement on September 7, 2009, reflected limited visibility over Orascom Telecom's liquidity, given a potential delay in the receipt of dividends from its Algerian subsidiary. "Nevertheless, we believe Mobilink's liquidity and funds from operations are sufficient to cover its near-term debt maturities and reduced capital expenditure," S&P said.
The rating on Mobilink factors in support from Orascom Telecom as the cross default clause at Orascom Telecom includes Mobilink, and Mobilink is the second-largest operation of Orascom Telecom by most financial measures. The rating on Mobilink could come under pressure if: (1) Orascom Telecom is downgraded by more than one notch, as the parent's ability to support Mobilink in case of financial or operating environment stress would diminish; or (2) Mobilink provides extraordinary financial support to Orascom Telecom, thereby materially weakening its liquidity position and financial flexibility.
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