Fitch Ratings has downgraded IHS Holding Limited's (IHS Holding) Long-Term Issuer Default Rating (IDR) to 'B+' from 'BB-'.

The Outlook is Stable. The senior unsecured instrument ratings have also been downgraded to 'B+' from 'BB-'. The Recovery Rating is 'RR4'.

The rating action follows the downgrade of Nigeria's sovereign ratings on 11 November 2022 (see 'Fitch Downgrades Nigeria to 'B-'; Outlook Stable' at http://www.fitchratings.com/). Nigeria's Long-Term Foreign-Currency Issuer Default Rating (LT FC IDR) and Country Ceiling were both downgraded to 'B-' from 'B'.

The downgrade to IHS Holding's ratings reflects the large contribution of Nigeria to the group's EBITDA and our view of IHS Holding's weaker operating environment following the sovereign downgrade. The applicable Country Ceiling for IHS Holding is 'B+', which is on a par with the Country Ceilings for its operations in Rwanda and Cameroon. Offshore available liquidity may have allowed the ratings to be notched above the applicable Country Ceiling but the ratings are weighed down by the weakened operating environment in Nigeria, its largest market.

Key Rating Drivers

For full key ratings drivers see 'Fitch Rates IHS Holding's Proposed Notes 'BB-' dated 16 November 2021.

Derivation Summary

See 'Fitch Rates IHS Holding's Proposed Notes 'BB-' dated 16 November 2021.

Key Assumptions

See 'Fitch Rates IHS Holding's Proposed Notes 'BB-' dated 16 November 2021.

For issuers with IDRs of 'B+' and below, Fitch performs a recovery analysis for each class of obligations of the issuer. The issue rating is derived from the IDR and the relevant Recovery Rating (RR) and notching, based on the going-concern (GC) enterprise value (EV) of the company in a distressed scenario or its liquidation value.

KEY RECOVERY ASSUMPTIONS

The recovery analysis assumes that IHS Holding would be a GC in bankruptcy and that it would be reorganised rather than liquidated

A 10% administrative claim

GC Approach

The GC EBITDA estimate reflects Fitch's view of a sustainable, post-reorganisation EBITDA level upon which Fitch bases the valuation of IHS Holding

The GC EBITDA is estimated at USD750 million

EV multiple of 5.5x

With these assumptions, our waterfall generated recovery computation (WGRC) for the senior unsecured notes is in the 'RR1' band. However, according to Fitch's Country-Specific Treatment of Recovery Ratings Criteria, the RR for corporate issuers in Nigeria is capped at 'RR4'. The RR for senior secured notes is, therefore, 'RR4' with a WGRC output percentage at 50%.

RATING SENSITIVITIES

IHS Holding

Factors that could, individually or collectively, lead to positive rating action/upgrade:

Improvement in the operating environment of the countries in which IHS operates or a positive change in the geographical mix of cashflows

Funds from operations (FFO) net leverage below 5.0x (4.5x on net debt/EBITDA) on a sustained basis, together with FFO interest coverage greater than 2.5x

Factors that could, individually or collectively, lead to negative rating action/downgrade:

Downgrades of the sovereign Country Ceilings of the countries IHS operates in, which could lead us to downgrade our applicable Country Ceiling

FFO net leverage above 6.0x on a sustained basis (5.5x net debt/EBITDA) or FFO interest coverage below 2.0x

Weak free cash flow (FCF) due to limited EBITDA growth, higher capex and shareholder distributions, or adverse changes to the group's regulatory or competitive environment

Liquidity risks, including challenges in moving cash out of operating companies to IHS Holding to service offshore debt

Best/Worst Case Rating Scenario

International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from 'AAA' to 'D'. Best- and worst-case scenario credit ratings are based on historical performance. For more information about the methodology used to determine sector-specific best- and worst-case scenario credit ratings, visit https://www.fitchratings.com/site/re/10111579.

Liquidity and Debt Structure

See 'Fitch Rates IHS Holding's Proposed Notes 'BB-' dated 16 November 2021.

REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING

The principal sources of information used in the analysis are described in the Applicable Criteria.

ESG Considerations

Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of '3'. This means ESG issues are credit-neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg

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