Moody’s has lowered TPSA’s debt rating from A3 to Baa1 with a negative outlook. The cut relates to the agency’s concerns about TPSA's ability to maintain strong financial ratios in the face of increasing competition and regulatory pressure. Moody’s also envisages the possibility of further top line and EBITDA margin erosion at (7,34 PLN, -0,14%) in the years ahead. The agency added that any increase in the net debt/EBITDA ratio to above 1.5x could result in a further deterioration of the firm’s debt rating.
Our view:
Confronted with increased competition in the mobile segment, as well as potential large cash outflows related to spectrum acquisition, spectrum renewals and the payment of an EU fine, we believe TPSA’s net debt/EBITDA ratio is likely to climb way above 1.5x. Thus the last comment from (49,37 USD, 0,90%) cited above would seem to suggest that a further deterioration in TPSA's debt rating is inevitable. recently announced plans to cooperate with its parent company in the field of financing, although such cooperation is unlikely to replace external financing entirely and the cost of the latter is set to increase with the deterioration in the firm's debt ratings. Overall, this is just another piece of bad news in the story.