Ratings agency raises Eircom’s default rating

Ratings agency Fitch has upgraded Eircom's default rating to B, and given it a stable outlook.

The “B” rating indicates “that material default risk is present, but a limited margin of safety remains”.

At the same time the agency has upgraded the company’s secured bank debt and the 9.25 per cent senior secured bonds due 2020 to “B+”.

"The rating upgrade reflects our view that Eircom has delivered the planned transformation of its operations; that revenues look increasingly likely to stabilise and that cost initiatives will improve operating cash flows," Fitch said. While the agency noted that Eircom's leveraged balance sheet is "unusual for an incumbent telecom", it said the business transformation and stabilising revenue outlook "is a significant achievement in a sector where top-line declines and margin pressure remain a risk". Fitch also noted that Eircom's TV product, launched in 2013, has shown good early signs of take-up.

Last October, Fitch said the departure of Herb Hribar from Eircom could affect the company’s credit rating. Mr Hribar stepped down as chief executive at the end of September, after the company pulled a proposed flotation. Fitch said the loss of key executives often leads to an “immediate rating action” and said the departure of Mr Hribar “is a prime example”.