Network i2i is a wholly-owned subsidiary of Bharti.
In its rationale note, Fitch on Airtel's senior unsecured notes said that the proposed senior unsecured notes will be rated in line with Bharti's senior unsecured rating of 'BBB-', as they will rank at least equally with all its other present and future unsecured and unsubordinated obligations.
On Network i2i's proposed subordinated perpetual notes, Fitch said that they will be rated two notches below Bharti's Long-Term Issuer Default Rating (IDR) - the same as the existing 5.65% subordinated perpetual bond rated at 'BB', to which they will rank pari passu. The issuance will be fully guaranteed by Bharti and will constitute a direct, unsecured and subordinated obligation of Bharti. The rating on the proposed notes will reflect the deeply subordinated nature, ranking junior to all existing and future debt obligations and senior only to Bharti's ordinary shares.
Further, Network i2i's proposed subordinated perpetual notes will qualify for 50% equity credit which meets Fitch's criteria concerning deep subordination, effective maturity above five years, full discretion to indefinitely defer interest coupon payments, limited events of default and the absence of material covenants and look-back provisions.
"We expect 50% equity credit for the securities until 2041, five years before the effective maturity date in 2046, which is when the replacement language expires. Equity credit drops to zero after 2041," Fitch said.
Also, Fitch said that the proceeds of the proposed senior unsecured notes and subordinated perpetual will be used to repay existing debt and for CAPEX.
At around 1.16 pm, Bharti Airtel is trading at Rs570.40 up 0.87% on Sensex.