Fitch, the credit ratings agency, has downgraded its stance on Eir senior secured debt, saying its financial standing has been weakened following the sale of a large minority stake in its wholesale broadband subsidiary and subsequent debt sale at the unit.
Fitch’s rating on the debt has fallen by one level to BB-, which is three levels deep into what’s known as junk, or non-investment, grade.
Earlier this year, Eir sold off a 49.9 per cent stake in its wholesale broadband subsidiary, Fibre Networks Ireland (FNI), to French private equity firm InfraVia. FNI went on to raise €765 million in debt.
Net proceeds from the deal, including the debt sale, totalled €1.2 billion, a company spokeswoman said in response to questions from The Irish Times this month.
The deal underpinned Eir’s payment of €800 million of dividends in the nine months to September to a holding company owned by its main shareholders, French billionaire Xavier Niel and two US hedge funds, Anchorage and Davidson Kempner.
“In a hypothetical financial distress scenario at Eir, we would expect the [group’s] finance company debt holders to now have a weakened claim over Eir’s fixed-line infrastructure assets, which we view as the most valuable component of Eir’s network and were moved to FNI in July 2022,” Fitch said.
Revenues last year came to €1.24 billion, down almost 5 per cent from the 12-month period to June 2017 – and continuing a trend of ongoing decline that started in 2008.
However, Eir’s earnings before interest, tax, depreciation and amortisation (ebitda) jumped more than 27 per cent between 2017 and 2021, to €662 million – driven by cost-cutting at the company.
Fitch said it expected dividend payments to fall to an average of €100 million a year between 2023 and 2025 and debt buybacks to total €600 million between this year and next.