Investing.com -- Moody’s Ratings has today adjusted the outlook for Helios Towers plc and HTA Group, Ltd. to positive from stable. Alongside this, the B1 long term corporate family rating (CFR), the B1-PD probability of default rating (PDR) of Helios Towers, and the B1 rating of its $850 million senior unsecured notes issued by HTA Group, Ltd. due in 2029 have been confirmed.

The outlook shift for Helios Towers is attributed to the company’s ongoing efforts to reduce its debt, successful transition to generating positive free cash flow, and consistently strong operating performance. In 2024, Moody’s adjusted debt to EBITDA ratio for the company decreased to 4.8x from 5.0x a year earlier. The company’s free cash flow generation also saw a significant improvement, reaching $14 million compared to an outflow of $81 million in the previous year.

Moody’s expects the debt to EBITDA leverage to continue its decline to 3.8x in the next one to two years, and free cash flow generation is forecasted to increase to approximately $100 million annually. Helios Towers has announced it will have the capacity for shareholder distributions once its reported net debt to EBITDA leverage hits approximately 3.0x, which is anticipated to occur between 2026 and 2027.

The rating of Helios Towers is further supported by its operations of telecom towers across nine countries in Sub-Saharan Africa and the Middle East, with strong market positions in seven of those countries. The company’s strong tower and co-location growth resulting in a strong Moody’s adjusted EBITDA margin of 51% in 2024, and an annuity-like contracted cash flow stream underpinned by long term contracts with leading mobile network operators also contribute to the rating.

However, the rating is constrained by the high-risk sovereign environments where the company operates, notably Tanzania and the Democratic Republic of the Congo, which accounted for 37% and 33% of EBITDA, respectively, as of 2024. The company’s mid-tier scale with a tower portfolio of 14,325 sites generating revenue of $792 million for 2024 is also a factor.

The positive outlook reflects the company’s ongoing deleveraging efforts, successful transition to generating positive free cash flow, consistently strong operating performance, as well as good liquidity. An upgrade over the next 12-18 months would be supported by a continued positive free cash flow generation and the establishment of a prudent shareholder distribution policy that balances adequate credit metrics and good liquidity with shareholder returns.

A potential upgrade would require Helios Towers to continue its path of deleveraging towards 4.0x debt/EBITDA, maintain a strong liquidity buffer at all times, and establish a track record of sustainable positive free cash flow generation. On the other hand, a negative rating action could occur if the sovereign credit profile of one of the company’s key markets materially deteriorated or if the company’s ability to regularly upstream cash to its holding company became restricted.

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