Mr. Tamir Amar
Chief Financial Officer
Tel: +972-54-781-4951
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Ms. Liat Glazer Shaft
Head of Investor Relations & Corporate Projects
Tel: +972-54-781-5051
E-mail: investors@partner.co.il
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Rating Action Overview
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2 |
Rating Action Rationale
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2 |
Outlook
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4 |
Downside Scenario
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4
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Upside Scenario
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4 |
Company Description
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5
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Base Case Scenario
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5 |
Key Assumption
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5 |
Key Metrics
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5
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Liquidity
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6
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Covenant Analysis
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6
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Recovery Analysis
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6 |
Key analytical factors
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6 |
Simulated default assumptions
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6 |
Simplified waterfall
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7 |
Modifiers
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7 |
Related Criteria And Research
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8 |
Ratings List
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9 |
1 | August 10, 2020
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www.maalot.co.il
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We believe Partner Communications Company Ltd. (“Partner” or “the Company”) maintains its competitive position in the communications market, among other things by reaping the results of
its recent years’ investments.
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•
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The outbreak of the coronavirus pandemic in March 2020 resulted in a material decline in revenue from roaming services. Continued competition in the mobile network market is also
expected to lead to a decrease in the Company’s revenue and EBITDA. However, growth in the number of TV and internet subscribers has mitigated this effect.
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•
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As a result of several moves taken by Partner this year, and despite the adverse effects of the coronavirus pandemic and intense competition in most of its fields of operation, the
Company maintains positive free cash flow and an adjusted debt to EBITDA ratio of about 3.0x.
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•
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We assess the Company’s liquidity as strong, as reflected in a sources to uses ratio above 1.5x and good access to the banking systems and to capital markets.
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On August 10, 2020, we affirmed our ‘ilA+’ rating on Partner Communications Company Ltd., and changed the outlook to stable from negative. We also affirmed our ‘ilA+’ rating on the
Company’s bond series.
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Partner’s stable outlook reflects our assessment that the Company will present coverage ratios commensurate with the current rating despite continued high capital expenditures and
despite the coronavirus pandemic and the competitive environment in the communications market. The stable outlook also reflects our assessment that Partner’s adjusted EBITDA margin will be about 20% and that its revenue base from TV
services and fiber optic internet subscribers will continue growing and preserve its competitive position. We expect Partner to present a positive yet low free cash flow and maintain a strong liquidity profile.
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2 | August 10, 2020
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www.maalot.co.il
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3 | August 10, 2020
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www.maalot.co.il
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4 | August 10, 2020
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www.maalot.co.il
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•
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Material decrease in roaming services revenue on the backdrop of the adverse effects of the coronavirus pandemic on the tourism industry.
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Continued decrease in mobile network revenues due to industry competition.
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Stability and even growth in TV and internet revenues based on growth in subscribers.
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Adjusted debt to EBITDA of 2.8x-3.5x in 2020-2021.
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Adjusted FFO (funds from operations) to debt of 25%-30% in 2020-2021.
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5 | August 10, 2020
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www.maalot.co.il
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Cash and cash equivalents at about NIS 1,135 million.
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•
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Cash FFO of NIS 430 million - NIS 450 million.
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Debt issuance of about NIS 325 million through option realization and Series G expansion in Q2 and Q3 of 2020.
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Debt Maturities of about NIS 670 million. Of which NIS 300 million were repaid in July 2020 when Series F was partially prepaid.
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Capital expenditures of about NIS 540 million.
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We are affirming our ‘ilA+’ rating, identical to the issuer rating, on Partner’s unsecured bond series (Series D, F, G). The recovery rating for these series is '3'
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Our recovery prospect assessment is constrained to the 50%-70% despite the simplified waterfall, due to or assessment that on the path to default the Company will exchange unsecured debt
for secured or senior debt
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Simulated year of default: 2024
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A recession in the Israeli economy will lead to a decrease in consumption, to an increase in churn rates and to increased competition in most segments, adversely affecting the Company's
cash flows and liquidity, such that it is unable to meet its debt service payments.
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As one of the Israeli communication market leaders, the Company will continue operating as a going concern, and undergo reorganization.
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6 | August 10, 2020
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www.maalot.co.il
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EBITDA at emergence: about NIS 277 million
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EBITDA multiple: 6.0x
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Gross enterprise value as going concern: about NIS 1,662 million
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Administrative costs: 5%
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Net value available to unsecured creditors: about NIS 1,580 million
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•
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Total unsecured debt: about NIS 1,245 million
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Recovery expectations for unsecured debt: 50%-70% (constrained as noted above)
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Recovery rating for unsecured debt (1 to 6): 3
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Mapping Recovery Percentages To Recovery Ratings
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Recovery expectations (%)
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Description
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Recovery rating
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Notching above/below issuer rating
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100%
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Full recovery
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1+
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+3 notches
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90%-100%
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Very high recovery
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1
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+2 notches
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70%-90%
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Substantial recovery
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2
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+1 notch
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50%-70%
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Meaningful recovery
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3
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0 notches
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30%-50%
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Average recovery
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4
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0 notches
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10%-30%
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Modest recovery
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5
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-1 notch
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0%-10%
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Negligible recovery
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6
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-2 notches
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7 | August 10, 2020
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www.maalot.co.il
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•
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Use Of CreditWatch And Outlooks, September 14, 2009
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Methodology: Management And Governance Credit Factors For Corporate Entities And Insurers, November 13, 2012
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•
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Methodology: Timeliness Of Payments: Grace Periods, Guarantees, And Use Of ‘D’ And ‘SD’ Ratings, October 24, 2013
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•
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Corporate Methodology, November 19, 2013
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•
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Country Risk Assessment Methodology And Assumptions, November 19, 2013
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•
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Methodology: Industry Risk, November 19, 2013
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•
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Key Credit Factors For The Telecommunications And Cable Industry, June 22, 2014
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Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, December 16, 2014
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•
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Recovery Rating Criteria For Speculative-Grade Corporate Issuers, December 7, 2016
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•
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Methodology For National And Regional Scale Credit Ratings, June 25, 2018
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•
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Corporate Methodology: Ratios And Adjustments, April 1, 2019
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•
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Group Rating Methodology, July 1, 2019
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•
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S&P Global Ratings Definitions, July 5, 2019
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8 | August 10, 2020
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www.maalot.co.il
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Rating Details
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Partner Communications Company Ltd.
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Issuer rating(s)
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Long term
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ilA+/Stable
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Issue rating(s)
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Senior Unsecured Debt
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Series D,F,G
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ilA+
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Issuer Credit Rating history
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Long term
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July 29, 2020
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ilA+/Stable
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August 05, 2019
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ilA+/Negative
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July 28, 2015
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ilA+/Stable
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June 20, 2013
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ilAA-/Stable
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December 06, 2012
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ilAA-/Negative
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September 10, 2012
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ilAA-/Watch Neg
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October 19, 2010
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ilAA-/Negative
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October 05, 2009
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ilAA-/Stable
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September 17, 2009
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ilAA-
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July 14, 2009
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ilAA-/Watch Dev
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May 24 ,2009
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ilAA-/Watch Pos
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October 28, 2008
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ilAA-/Stable
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September 25, 2007
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ilAA-/Positive
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May 20 ,2007
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ilAA-/Stable
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July 28, 2004
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ilAA-
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16 February, 2004
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ilA+
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August 01, 2003
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ilA
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Additional details
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Time of the event
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10/08/2020 08:18
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Time when the event was learned of
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10/08/2020 08:18
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Rating requested by
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Issuer
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9 | August 10, 2020
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www.maalot.co.il
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10 | August 10, 2020
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www.maalot.co.il
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Partner Communications Company Ltd.
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By:
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/s/ Tamir Amar
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Name: Tamir Amar
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Title: Chief Financial Officer
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