Eir receives ratings boost from Moody’s ahead of fund raising

Eir has received a boost ahead of its plan to raise €350 million to take out a high-interest bond, after the ratings agency Moody’s upgraded the company’s rating.

The agency upgraded the telco from B3 to B2, with a positive outlook. Moody’s said the company is “in a strong position” in the B2 category, “with the potential for moving to B1 on the basis of further improvements in performance”.

Richard Moat, the chief executive of Eir, welcomed the upgrade, which he said brings Moody’s into line with the other ratings agencies, Standard & Poors and Fitch.

He said it should make it cheaper for Eir to borrow money, should it choose to issue further debt to take out a high-yield bond this summer.

The company has not yet decided how it will raise cash to refinance the 9.25 per cent bond, but it has indicated that it may look to borrow.

“In 2012 [just after Eir’s examinership], a rating CCC was a bad place to be. We are very pleased to be where we are now,” said Mr Moat.

Moody’s telecoms analyst Ivan Palacios said the upgrade was because of improvements in Eir’s revenues and earnings and also because of a reduction in its pension deficit.

“The positive outlook reflects our view that Eir’s operating performance will continue to improve over the next 12-18 months,” he said.

Mr Palacios cited growth in the company’s fibre broadband subscriptions, increases in the average revenue per household, better performance from its mobile division and cost cutting.

“These will allow Eir to generate growing free cash flows, and to reduce debt further,” said Mr Palacios.

“Its enhanced network, coupled with recent investments in exclusive content through the acquisition of Setanta Sports, should allow the company to monetise the increasing demand for its products and services, and strengthen its competitive position.”

The upgrade is also indicative of the more positive view of ratings agencies towards Ireland’s economic prospects. Moody’s said “a strong macroeconomic environment, with Ireland’s GDP reaching 7.8 per cent in 2015, and a more stable competitive environment, have led to overall rational market pricing.”

Eir reported a four per cent rise in revenues for the first half of its financial year, to €653 million.

Mr Moat said Eir would not need to look outside the company for funding should it be successful in the tender for the National Broadband Plan (NBP) for State-subsidised rural broadband. It is favoured to acquire at least one of the two packages up for grabs.