Mr. Tamir Amar
Deputy CEO & Chief Financial Officer
Tel: +972-54-781-4951
|
Mr. Amir Adar
Head of Investor Relations & Corporate Projects
Tel: +972-54-781-5051
Email: investors@partner.co.il
|
Please note that this translation was made for convenience purposes and for the company's use only and under no
circumstances shall obligate S&P Global Ratings Maalot Ltd. The translation has no legal status and S&P Global Ratings Maalot Ltd. does not assume any responsibility whatsoever as to its accuracy and is not bound by its contents.
In the case of any discrepancy with the official Hebrew version published on August 11, 2021, the Hebrew version shall apply.
|
Overview
|
2 |
Outlook
|
3
|
Downside Scenario
|
3
|
Upside Scenario
|
3
|
Base Case Scenario
|
3
|
Key Assumptions
|
3
|
Key Metrics
|
3
|
Base Case Projections
|
4 |
Company Description
|
4 |
Business Risk
|
5
|
Financial Risk
|
6 |
Liquidity
|
7 |
Debt Maturities
|
7 |
Covenant Analysis
|
7 |
Modifiers
|
8 |
Recovery Analysis
|
8 |
Key analytical factors
|
8 |
Simulated default assumptions
|
8 |
Simplified Waterfall
|
8 |
Reconciliation
|
9 |
Related Criteria And Research
|
11
|
Ratings List
|
12 |
1 ׀ August 11, 2021
|
Rating Affirmation
|
Partner Communications Company Ltd.
|
Issuer Credit Affirmed
|
ilA+/Stable |
Key Strengths
|
Key Risks
|
• Maintaining a leading competitive position in the Israeli communications market.
• Diversified mix of operations in the various communication segments.
• Access to a variety of funding sources.
• Low leverage compared with competitors.
|
• Exposure to regulatory changes.
• High competition in the areas of activity.
• Downward trend in cellular operations’ revenues and profitability.
• Continued decrease in available cash flow (after capital expenditures).
|
2 ׀ August 11, 2021
|
www.maalot.co.il
|
Partner Communications Company Ltd.
|
• |
Moderate growth in revenue and EBITDA in 2021 and 2022.
|
• |
Stability to moderate increase in revenues from cellular operations following some recovery in roaming revenues and an increase in end equipment sales, despite our assessment of a further moderate decline in average monthly revenues
per cellular user subscriber (ARPU) in 2021.
|
• |
Growth in TV and internet revenues based on growth in subscribers and wider fiber-optic network.
|
• |
Annual reported investments of NIS 650 million - NIS 700 million in 2021 and 2022, mainly for the deployment of fiber-optic network.
|
• |
No dividend distribution in 2021.
|
3 ׀ August 11, 2021
|
www.maalot.co.il
|
Partner Communications Company Ltd.
|
Financial Metric
|
2020A
|
2021E
|
2022E
|
EBITDA margin
|
21.3%
|
20%-23%
|
21% -24%
|
Debt/EBITDA
|
2.7x
|
2.4x-2.7x
|
2.2x-2.5x
|
FFO/debt
|
33.1%
|
30%-36%
|
35%-40%
|
4 ׀ August 11, 2021
|
www.maalot.co.il
|
Partner Communications Company Ltd.
|
5 ׀ August 11, 2021
|
www.maalot.co.il
|
Partner Communications Company Ltd.
|
Partner Communications Co. Ltd. – Financial Summary (Mil. NIS) |
2020
|
2019
|
2018
|
2017
|
2016
|
||||||||||||||||
Revenue
|
3,189
|
3,234
|
3,259
|
3,268
|
3,544
|
|||||||||||||||
EBITDA
|
679
|
732
|
744
|
928
|
751
|
|||||||||||||||
Funds from operations (FFO)
|
611
|
674
|
641
|
700
|
571
|
|||||||||||||||
Interest expense
|
73
|
77
|
81
|
207
|
149
|
|||||||||||||||
Cash interest paid
|
67
|
57
|
101
|
199
|
150
|
|||||||||||||||
Cash flow from operations
|
609
|
686
|
574
|
996
|
1,070
|
|||||||||||||||
Capital expenditure
|
458
|
534
|
411
|
376
|
196
|
|||||||||||||||
Free operating cash flow (FOCF)
|
151
|
152
|
163
|
620
|
874
|
|||||||||||||||
Discretionary cash flow (DCF)
|
151
|
150
|
63
|
620
|
874
|
|||||||||||||||
Cash and short-term investments
|
787
|
851
|
416
|
1,017
|
1,168
|
|||||||||||||||
Gross available cash
|
787
|
851
|
416
|
1,017
|
1,168
|
|||||||||||||||
Debt
|
1,845
|
1,952
|
1,680
|
1,755
|
2,517
|
|||||||||||||||
Equity
|
1,723
|
1,417
|
1,406
|
1,434
|
1,111
|
|||||||||||||||
Adjusted ratios
|
||||||||||||||||||||
Annual revenue growth (%)
|
(1.4
|
)
|
(0.8
|
)
|
(0.3
|
)
|
(7.8
|
)
|
(13.8
|
)
|
6 ׀ August 11, 2021
|
www.maalot.co.il
|
Partner Communications Company Ltd.
|
2020
|
2019
|
2018
|
2017
|
2016
|
||||||||||||||||
EBITDA margin (%)
|
21.3
|
22.6
|
22.8
|
28.4
|
21.2
|
|||||||||||||||
Return on capital (%)
|
2.4
|
(1.0
|
)
|
1.1
|
6.3
|
(0.6
|
)
|
|||||||||||||
EBITDA interest coverage (x)
|
9.3
|
9.5
|
9.2
|
4.5
|
5.0
|
|||||||||||||||
FFO cash interest coverage (x)
|
10.1
|
12.8
|
7.3
|
4.5
|
4.8
|
|||||||||||||||
Debt/EBITDA (x)
|
2.7
|
2.7
|
2.3
|
1.9
|
3.4
|
|||||||||||||||
FFO/debt (%)
|
33.1
|
34.5
|
38.1
|
39.9
|
22.7
|
|||||||||||||||
Cash flow from operations/debt (%)
|
33.0
|
35.2
|
34.2
|
56.7
|
42.5
|
|||||||||||||||
FOCF/debt (%)
|
8.2
|
7.8
|
9.7
|
35.3
|
34.7
|
|||||||||||||||
DCF/debt (%)
|
8.2
|
7.7
|
3.7
|
35.3
|
34.7
|
Principal Liquidity Sources
|
Principal Liquidity Uses
|
• About NIS 947 million in cash and cash
equivalent.
• Cash FFO (funds from operations) of NIS 640
million - NIS 660 million.
• Debt issuance proceeds of about NIS 23 million as part of option realization in the second quarter of 2021.
|
• Ongoing maturities of long term loans and bonds
of about NIS 290 milion.
• Capital expenditure of NIS 650 million - NIS
700 million.
|
Debt Maturities
|
|||||
Year
|
2021
|
2022
|
2023
|
2024
|
2025 onwards*
|
Maturities (Mil. NIS)
|
290 (*)
|
265
|
236
|
224
|
596
|
7 ׀ August 11, 2021
|
www.maalot.co.il
|
Partner Communications Company Ltd.
|
• |
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', reflecting our assessment that in the hypothetical default scenario,
the recovery rate would be 50%-70%.
|
• |
Our recovery prospect assessment is constrained to the 50%-70% range despite the simplified waterfall, due to our assessment that on the path to default the Company will exchange unsecured debt for secured or senior debt.
|
• |
Simulated year of default: 2026
|
• |
A recession in the Israeli economy will lead to a decrease in consumption, to a decrease in revenues in some traditional segments 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.
|
• |
As one of the Israeli communication market leaders, the Company will continue operating as a going concern, and undergo reorganization.
|
• |
EBITDA at emergence: about NIS 232 million
|
• |
Industry EBITDA multiple: 6.0x
|
• |
Gross enterprise value as going concern: about NIS 1,392 million
|
• |
Administrative costs: 5%
|
• |
Net enterprise value available to unsecured creditors: about NIS 1,322 million
|
• |
Total unsecured debt: about NIS 888 million
|
• |
Recovery expectations for unsecured debt: 50%-70%
|
• |
Recovery rating for unsecured debt (1 to 6): 3 (constrained as mentioned above)
|
8 ׀ August 11, 2021
|
www.maalot.co.il
|
Partner Communications Company Ltd.
|
Mapping Recovery Percentages To Recovery Ratings
|
Recovery expectations (%)
|
Description
|
Recovery rating
|
Notching above/below issuer rating
|
100%
|
Full recovery
|
1+
|
+3 notches
|
90%-100%
|
Very high recovery
|
1
|
+2 notches
|
70%-90%
|
Substantial recovery
|
2
|
+1 notch
|
50%-70%
|
Meaningful recovery
|
3
|
0 notches
|
30%-50%
|
Average recovery
|
4
|
0 notches
|
10%-30%
|
Modest recovery
|
5
|
-1 notch
|
0%-10%
|
Negligible recovery
|
6
|
-2 notches
|
• |
Capitalization of subscribers’ acquisition costs in the amount of approximately NIS 115 million and their reduction from EBITDA, operating cash flow and capital expenditure.
|
• |
Pension adjustments of about NIS 30 million to financial debt.
|
• |
Guarantee adjustments of about NIS 73 million to financial debt.
|
• |
Deducting excess cash, as we define it, of about NIS 0.6 billion, from reported financial debt.
|
Partner Communications Co. Ltd.--Reconciliation Of Reported Amounts With S&P Global Ratings' Adjusted Amounts (Mil. NIS) for the Fiscel Year Ended Dec 31, 2020
|
Debt
|
EBITDA
|
Operating income
|
Interest expense
|
S&P Global Ratings' adjusted
EBITDA
|
Cash flow from operations
|
Capital expenditure
|
||||||||||||||||||||||
Reported
|
1,599.0
|
810.0
|
96.0
|
71.0
|
679.0
|
786.0
|
573.0
|
|||||||||||||||||||||
S&P Global Ratings adjustments
|
||||||||||||||||||||||||||||
Cash taxes paid
|
--
|
--
|
--
|
--
|
(1.0
|
)
|
--
|
--
|
||||||||||||||||||||
Cash interest paid
|
--
|
--
|
--
|
--
|
(67.0
|
)
|
--
|
--
|
9 ׀ August 11, 2021
|
www.maalot.co.il
|
Debt
|
EBITDA
|
Operating income
|
Interest expense
|
S&P Global Ratings'
adjusted EBITDA
|
Cash flow from
operations
|
Capital expenditure
|
||||||||||||||||||||||
Trade receivables securitizations
|
1.0
|
--
|
--
|
--
|
--
|
(1.0
|
)
|
--
|
||||||||||||||||||||
Reported lease liabilities
|
702.0
|
--
|
--
|
--
|
--
|
--
|
--
|
|||||||||||||||||||||
Postretirement benefit obligations/defer red
compensation
|
32.3
|
--
|
--
|
2.0
|
--
|
--
|
--
|
|||||||||||||||||||||
Accessible cash and liquid investments
|
(590.3
|
)
|
--
|
--
|
--
|
--
|
--
|
--
|
||||||||||||||||||||
Capitalized development costs
|
--
|
(115.0
|
)
|
(18.0
|
)
|
--
|
--
|
(115.0
|
)
|
(115.0
|
)
|
|||||||||||||||||
Share-based compensation expense
|
--
|
12.0
|
--
|
--
|
--
|
--
|
--
|
|||||||||||||||||||||
Asset- retirement obligations
|
16.2
|
--
|
--
|
--
|
--
|
--
|
--
|
|||||||||||||||||||||
Nonoperating income (expense)
|
--
|
--
|
5.0
|
--
|
--
|
--
|
--
|
|||||||||||||||||||||
Reclassificatio n of interest and dividend cash
flows
|
--
|
--
|
--
|
--
|
--
|
(61.0
|
)
|
--
|
||||||||||||||||||||
Debt: Guarantees
|
73.0
|
--
|
--
|
--
|
--
|
--
|
--
|
|||||||||||||||||||||
Debt: Litigation
|
12.0
|
--
|
--
|
--
|
--
|
--
|
--
|
|||||||||||||||||||||
EBITDA: Other
|
--
|
(28.0
|
)
|
(28.0
|
)
|
--
|
--
|
--
|
--
|
|||||||||||||||||||
EBIT: Other
|
--
|
--
|
28.0
|
--
|
--
|
--
|
--
|
|||||||||||||||||||||
Total adjustments
|
246.3
|
(131.0
|
)
|
(13.0
|
)
|
2.0
|
(68.0
|
)
|
(177.0
|
)
|
(115.0
|
)
|
Debt
|
EBITDA
|
EBIT
|
Interest expense
|
Funds from operations
|
Cash flow from operations
|
Capital expenditure
|
||||||||||||||||||||||
Adjusted
|
1,845.3
|
679.0
|
83.0
|
73.0
|
611.0
|
609.0
|
458.0
|
10 ׀ August 11, 2021
|
www.maalot.co.il
|
• |
Principles Of Credit Ratings, February 16, 2011
|
• |
Methodology: Management And Governance Credit Factors For Corporate Entities And Insurers, November 13, 2012
|
• |
Methodology: Industry Risk, November 19, 2013
|
• |
Country Risk Assessment Methodology And Assumptions, November 19, 2013
|
• |
Corporate Methodology, November 19, 2013
|
• |
Key Credit Factors For The Telecommunications And Cable Industry, June 23, 2014
|
• |
Methodology And Assumptions: Liquidity Descriptors For Global Corporate Issuers, December 16, 2014
|
• |
Recovery Rating Criteria For Speculative-Grade Corporate Issuers, December 7, 2016
|
• |
Methodology For National And Regional Scale Credit Ratings, June 25, 2018
|
• |
Corporate Methodology: Ratios And Adjustments, April 1, 2019
|
• |
Group Rating Methodology, July 1, 2019
|
• |
S&P Global Ratings Definitions, January 5, 2021
|
11 ׀ August 11, 2021
|
www.maalot.co.il
|
Partner Communications Company Ltd.
|
Rating
|
Date when the
rating was first published
|
Last date when
the rating was updated
|
Issuer rating(s)
|
|||
Long term
|
ilA+/Stable
|
01/08/2003
|
11/08/2020
|
Issue rating(s)
|
|||
Senior Unsecured Debt
|
|||
Series D
|
ilA+
|
09/03/2010
|
11/08/2020
|
Series F
|
ilA+
|
02/07/2017
|
11/08/2020
|
Series G
|
ilA+
|
09/12/2018
|
11/08/2020
|
Issuer Credit Rating history
|
|||
Long term
|
|||
August 10, 2020
|
ilA+/Stable
|
||
August 05, 2019
|
ilA+/Negative
|
||
July 29, 2015
|
ilA+/Stable
|
||
June 20, 2013
|
ilAA-/Stable
|
||
December 06, 2012
|
ilAA-/Negative
|
||
September 10, 2012
|
ilAA-/Watch Neg
|
||
October 19, 2010
|
ilAA-/Negative
|
||
October 05, 2009
|
ilAA-/Stable
|
||
September 17, 2009
|
ilAA-
|
||
July 14, 2009
|
ilAA-/Watch Dev
|
||
May 24 ,2009
|
ilAA-/Watch Pos
|
||
October 28, 2008
|
ilAA-/Stable
|
||
September 25, 2007
|
ilAA-/Positive
|
||
May 20 ,2007
|
ilAA-/Stable
|
||
August 03, 2004
|
ilA
|
||
July 28, 2004
|
ilAA-
|
||
16 February, 2004
|
ilA+
|
||
Additional details
|
|||
Time of the event
|
01/08/2021 17:32
|
||
Time when the event was learned of
|
01/08/2021 17:32
|
||
Rating requested by
|
Issuer
|
12 ׀ August 11, 2021
|
www.maalot.co.il
|
13 ׀ August 11, 2021
|
www.maalot.co.il
|
|
Partner Communications Company Ltd.
|
|
|
|
|
|
|
By:
|
/s/ Tamir Amar
|
|
|
|
|
Name: Tamir Amar
|
|
|
|
Title: Deputy CEO&Chief Financial Officer
|
|
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