Eutelsat HQ

Eutelsat Communications has requested that Moody’s Investors Service withdraw all of its ratings on the company. According to Eutelsat, the decision was made in the context of ongoing cost rationalization.

The European satellite operator said in a statement that its financial policy remains unchanged with a confirmed commitment to investment grade and an objective of a net debt/EBITDA ratio below 3.0x. The company is in the midst of a cost savings plan called LEAP 2. 

In its First Quarter revenue statement in October 2019, CEO Rodolphe Belmer said: “We have added a further lever to our cash flow strategy with the roll-out of the LEAP 2 cost-savings plan, aiming to generate opex economies of 20-25 million Euro by FY 2021-22, which will be reinvested in our future growth verticals whilst preserving our EBITDA margin.” 

Marie-Sophie Ecuer, Eutelsat’s corporate communications director said in an email that is “very rare” for a company of Eutelsat’s size to sponsor three ratings. The company still retains solicited ratings from S&P Global Ratings and Fitch Ratings. Ecuer also said that Moody’s will still be able to access Eutelsat’s public financial information. Eutelsat did not respond to a question of how much savings dropping the rating bring. 

On Thursday, Moody’s announced that it had completed a periodic review of Eutelsat’s ratings and other ratings associated with the same analytical unit. The review was conducted through a portfolio review in which Moody’s reassessed the appropriateness of the ratings in the context of the relevant principal methodology(ies), recent developments, and a comparison of the financial and operating profile to similarly rated peers. According to Moody’s the press release, the review does not indicate a credit rating action and is not an indication of whether or not a credit rating action is likely in the near future.

From Moody’s review:

“Eutelsat SA’s Baa3 long-term issuer rating reflects the company’s joint market leadership in satellite-distributed video in Europe and the solid contract backlog; as well as high EBITDA margin. However, we expect ongoing modest earnings pressure due to continued pricing pressure and revenue contraction in particular in the Fixed Data segment, partially offset by potential for modest growth in the Video segment. Moody’s-adjusted gross leverage will improve marginally in 2020 following the repayment of the €930 million bond maturing in January 2020. The Ba1 rating for the senior unsecured bank facilities at the parent Eutelsat Communications SA reflects the structural subordination to the debt and other claims at Eutelsat SA.”

According to Nasdaq, Baa3 is the lowest rating of investment grade Moody’s Long-term Corporate Obligation Rating. Obligations rated Baa3 are subject to moderate credit risk.