Telecoms company Eir is likely to scale back annual dividends to between €100 million and €150 million for this year and next following a period of bumper payments to its main shareholders, French billionaire Xavier Niel and two New York hedge funds, according to debt ratings agency Moody’s.
Eir has distributed almost €2 billion to shareholders since two companies controlled by Mr Niel acquired 64.5 per cent of the group in April 2018 in a deal that put an equity value on the business of €1 billion.
The remainder of Eir is owned by US hedge funds Anchorage and Davidson Kempner, that sold part of their existing holdings as Mr Niel’s NJJ investment vehicle and his Iliad telecoms business took the controlling stake.
Eir paid €237 million of dividends to the three investors in the first nine months of last year, following €800 million of distributions in 2022.
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Moody’s estimates that the €100 million-€150 million that Eir will pass on to its owners in 2024 and 2025 will equate to all of the free cash flow – the money left over after running costs and investment – that the company will generate over the period.
Still, the ratings agency has moved to raise its outlook on the junk-grade rating it has on Eir’s creditworthiness to stable from negative. Its rating on Eir stands at B1, which is 13 rungs below its top-notch AAA grade and four levels deep into junk, or non-investment grade, territory.
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The improved outlook is based on an expectation that Eir’s operating performance “will recover over the next 12-18 months after a modest decline in 2023″. The company’s earnings before interest, tax, depreciation and amortisation dipped to €456 million for the first nine months of 2023 from €473 million for the same period in 2022, according to its latest quarterly figures.
Moody’s also expects Eir’s debt burden, relative to earnings, to improve marginally in the coming years. Its total borrowings stood at €2.95 billion as of September.
The ratings firm says it “positively recognises” the group’s roll-out of fibre broadband, with 1.2 million homes passed in 2023 from 400,000 in 2019, its “solid” 61 per cent market share of the fixed broadband market and improving mobile market share, which currently stands at 23 per cent.
Moody’s says it understands Eir is considering seeking to extend repayment of a €1.2 billion term loan that is due to be repaid in May 2026, with the aim to push out the maturity to 2029.
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