Washington, D.C. 20549
FORM 6-K
REPORT OF FOREIGN PRIVATE ISSUER
PURSUANT TO RULE 13a-16 OR 15a-16 OF
THE SECURITIES EXCHANGE ACT OF 1934
Report on Form 6-K dated
August 5, 2019
Partner Communications Company Ltd.
(Translation of Registrant’s Name Into English)
8 Amal Street
Afeq Industrial Park
Rosh Ha’ayin 48103
Israel
(Address of Principal Executive Offices)
(Indicate by check mark whether the registrant files or will file annual reports
under cover of Form 20-F or Form 40-F.)
Form 20-F ☒ Form 40-F ☐
(Indicate by check mark whether the registrant by furnishing the
information contained in this Form is also thereby furnishing the information to the
Commission pursuant to Rule 12g3-2(b) under the Securities Exchange Act of 1934.)
Yes ☐ No ☒
(If “Yes” is marked, indicate below the file number assigned to the
registrant in connection with Rule 12g3-2(b): 82- )
This Form 6-K is incorporated by reference into the Company’s Registration Statements on Form S-8 filed with the Securities and Exchange Commission on December
4, 2002 (Registration No. 333-101652), September 5, 2006 (Registration No. 333-137102), September 11, 2008 (Registration No. 333-153419), August 17, 2015 (Registration No. 333-206420), November 12, 2015 (Registration No. 333-207946), March 14, 2016
(Registration No. 333-210151) and on December 27, 2017 (Registration No. 333-222294), November 21, 2018 (Registration No. 333-228502)
enclosure: Partner Communications announces that S&P maalot has reaffirmed the company's ilA+ credit rating and updated the company's rating outlook to negative
PARTNER COMMUNICATIONS ANNOUNCES THAT
S&P MAALOT HAS REAFFIRMED THE COMPANY'S ilA+
CREDIT RATING AND UPDATED THE COMPANY'S RATING
OUTLOOK TO NEGATIVE
ROSH HA'AYIN, Israel, August 5, 2019 - Partner Communications Company Ltd. ("Partner" or the "Company") (NASDAQ and TASE: PTNR), a leading Israeli communications
operator reports today that Standard & Poor’s Global Ratings Maalot Ltd. (“Maalot”), has published a rating report regarding the Company. In its report, Maalot reaffirmed the Company’s 'ilA+'
credit rating and updated the Company's rating outlook from "stable" to "negative". In addition, Maalot reaffirmed the 'ilA+' rating of the Company's series of debentures.
In accordance with the Maalot report, the negative outlook reflects Maalot's assessment that the intense competition in the entire telecommunications market will continue in 2019-2020, and an additional erosion will
occur in the Company's operating performance that will lead to adjusted profitability (EBITDA margin), below 20%. In addition, the Company's extensive investments in the fiber optics project might, in their assessment, lead to low to negative free
cash flow in the next 12 months and erode the Company's cash reserves. However Maalot noted that most investments are in growth engines, such as the fiber optics project and in increasing the TV service’s penetration, and they can be decreased or
spread out if necessary. Maalot believes that the acceleration of these investments is material in preserving Partner’s position as one of the three leading telecommunication companies in Israel and is expected to support its business profile in
the long term. Furthermore, Maalot expects the Company's leverage to increase in 2019-2020 but will remain low compared with its competitors.
For further information see S&P Maalot's full Report dated August 5, 2019 on:
https://www.maalot.co.il/Publications/495/FRPar20190805171407.pdf or its informal English translation attached to this immediate report on Form 6-k furnished to the Securities and Exchange
Commission.
About Partner Communications
Partner Communications Company Ltd. is a leading Israeli provider of telecommunications services (cellular, fixed-line telephony, internet and television services). Partner’s ADSs are quoted on the NASDAQ Global
Select Market™ and its shares are traded on the Tel Aviv Stock Exchange (NASDAQ and TASE: PTNR).
For more information about Partner see:
http://www.partner.co.il/en/Investors-Relations/lobby/
Contacts:
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Mr. Tamir Amar
Chief Financial Officer
Tel: +972-54-781-4951
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Ms. Liat Glazer Shaft
Head of Investor Relations & Corporate Projects
Tel: +972-54-781-5051
E-mail: investors@partner.co.il
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Partner Communications Company Ltd.
August 5, 2019
Research Update
‘ilA+’ Rating Affirmed, Outlook Updated To Negative On Weakening Of Operating Performance
Primary Credit Analyst:
Tom Dar, 972-3-7539722 tom.dar@spglobal.com
Additional Contact:
Tamar Stein, 972-3-7539721 tamar.stein@spglobal.com
Table of Contents
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Please note that this translation was made for convenience purposes and for the company's use only and under no
circumstances shall obligate S&P Global Ratings Maalot. The translation hasno legal status and S&P Global Ratings Maalot does not assume any responsibility whatsoever as to its accuracy and is not bound by its contents. In the case of any
discrepancy with the official Hebrew version published on August 4, 2019, the Hebrew version shall apply.
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Research Update
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August 5, 2019 |
1
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Partner Communications Company Ltd.
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Research Update
‘ilA+’ Rating Affirmed, Outlook Updated To Negative On Weakening Of Operating Performance
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Following continued intense competition in the Israeli communication market, Partner Communications Company Ltd.’s
(“Partner”) operating performance continued to weaken in 2018, as reflected, inter alia, by a decrease in EBITDA.
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As we estimate that intense competition will prevail in the entire communication market, we expect further erosion in the
Company’s operating performance in 2019-2020, leading to adjusted profitability (EBITDA margin) below 20%.
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We believe the Company’s extensive investments in the fiber optics project will lead to low to negative free cash flow and
erode the Company’s cash reserves, but are expected to support its business risk profile in the long term.
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We expect the Company’s leverage to increase in 2019-2020, but remain low compared with peers.
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On August 5, 2019, we affirmed our ‘ilA+’ rating on Partner Communications Company Ltd. and updated theoutlook to negative
from stable. We also affirmed our ‘ilA+’ rating on the Company’s bond series.
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The negative outlook reflects our expectation that the Company’s operating performance will continue to weaken, as
reflected in a decrease in operating profitability, as a result of competitive market conditions in all of the Company’s segments of operation. The negative outlook also reflects our assessment that the numerous investments the Company
plans in the next few years may erode its cash reserves and lead to a low to negative free cash flow from operations in the next 12 months.
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The update on Partner’s outlook to negative reflects our assessment that the weakening in operating performance that
occurred in 2018 will continue in 2019-2020. This weakening is mainly due to intense price competition in the mobile segment and the Company’s failure to fully compensate for it using revenues from TV and internet services, which are also
affected by intense competition. In addition, the Company started accelerating its investments in 2018, mainly in fiber optics and the TV segment. We expect Partner’s annual investments will total to NIS 600 million – NIS 650 million in the next
two years (compared with about NIS 400 million in 2017), mostly in the internet and TV segments.
The negative outlook reflects the fact that the Company’s entire operating cash flow is earmarked to finance these
investments, leading to a decrease in the Company’s cash reserves, and a possible low to negative operating cash flow in the next few years.
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www.maalot.co.il
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August 5, 2019 | 2
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Partner Communications Company Ltd.
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However we note that most investments are in growth engines such as the fiber optics project and in increasing the TV
service’s penetration, and may be decreased or spread out if necessary. We believe the acceleration of these investments is material in preserving Partner’s position as one of the three leading communication companies in Israel and is expected to
support its business profile in the long term
In our base case scenario we expect the intense competition in the mobile segment to continue in 2019 and lead to a decrease
of 5%-10% in Partner’s revenues from this segment. We expect this decrease to be somewhat mitigated by the increase in fixed line activity. We expect the revenue decrease to continue in 2020, albeit at a slightly moderate level, the more the
Company manages to penetrate the TV and internet market. As a result, we expect the Company’s operating profitability to decrease, as reflected in an adjusted EBITDA margin of about 20% compared with 23% in 2018.
The Company has been deleveraging over the years. In the past five years, its adjusted debt was reduced by about 60%, and in
2018 it was reduced by about 4% to about NIS 1.7 billion. However, as a result of our expectation of an increase in debt and a decrease in cash reserves following investment growth, simultaneously with a decrease in operating profitability, we
consider it to be highly likely that the Company’s leverage will increase in 2020-2021, to be reflected in an increase in the adjusted debt to EBITDA ratio to 3.0x-3.5x compared with less than 3.0x in 2017-2018.
The negative outlook reflects our expectation that the Company’s operating performance will weaken, as reflected in a
decrease in operating profitability, as a result of competitive market conditions in all of the Company’s segments of operation. The negative outlook also reflects our assessment that the numerous investments the Company plans in the next few
years may erode its cash reserves and lead to a low to negative free cash flow from operations in the next 12 months.
We will lower the rating if the Company’s adjusted EBITDA margin drops materially below 20% and its cash flow permanently
deteriorates. This could happen as a result of continued weakening in mobile segment results and accelerated investments which would not be sufficiently mitigated by growth in the Company’s other segments of operation. An adjusted debt to EBITDA
ratio above 4.0x or a deterioration in the liquidity profile will also lead to a downgrade. We may also lower the rating if the Company’s business profile is weakened, as reflected in a higher churn rate or materially lower profitability, or if
we estimate that Partner’s competitive position vis-à-vis peers has weakened.
We will update the outlook to stable if we observe a stabilization in the Company’s operating performance, including the
stabilization of its operating profitability consistently above 20%. We would also update the outlook to stable if the Company implements its planned investments while consistently maintaining a positive operating cash flow without jeopardizing
its business position and competitive advantage, and maintaining an adjusted debt to EBITDA ratio of 3x-4x and at least ‘adequate’ liquidity.
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www.maalot.co.il
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August 5, 2019 |3
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Partner Communications Company Ltd.
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Partner Communications Company Ltd. is one of the three largest communication companies in Israel. The Company operates in
two major segments: cellular communication and fixed-line communication. The cellular communication segment generates most of the Company’s revenues, and includes all services provided on the cellular network: airtime, roaming, content services
and sale and leasing of related equipment. The fixed-line communication segment includes providing internet services, business client communication services, Partner TV, international communication and network end solutions. This segment also
includes the sale of international communication routers and phones.
Our base-case scenario is underpinned by the following key assumptions:
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A 3%-5% decrease in revenues in 2019 due to lower revenues in the mobile segment.
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Continued decline in EBITDA due to market competition in all segments of operations and expected growth in content
and marketing expenses.
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Capital expenditures of about NIS 600 million – NIS 650 million per year in 2019-2020.
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Low to negative free cash flow.
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Under our base-case scenario, we forecast debt coverage ratios to be as follows:
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Adjusted debt to EBITDA of 3x-4x in 2019-2020.
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FFO (funds from operations) to adjusted debt of 20%-30% in 2019-2020.
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We assess Partner’s liquidity as ‘adequate’. We expect the ratio between the Company's sources and uses to exceed 1.2x in
the 12 months starting April 1, 2019. This assessment is based on the current cash balance, on the Company’s cash generation ability and on a proactive liquidity policy reflected in the issuance of deferrable bonds and options. The Company’s good
access to various funding sources in the local capital market contributes to the Company’s overall liquidity assessment, although in case of a general market crisis this access may not be maintained. We stress that our assessment is based on the
assumption that the Company will not distribute dividends in the short- to medium term. However, although the ratio between the Company’s sources and uses is high, we expect it may erode as the Company’s investment plan leads to lower cash flows
and in the absence of a publicly announced liquidity policy to maintain cash reserves.
In our base-case scenario we estimate the Company's main sources in the 12 months starting April 1, 2019 to be as follows:
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Cash and liquid investments of about NIS 600 million;
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Cash flow from operations of about NIS 500 million – NIS 560 million;
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www.maalot.co.il
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August 5, 2019 |4
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Partner Communications Company Ltd.
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Debt issuance of about NIS 275 million in December 2019
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Our assumptions regarding the Company's uses in the same period are as follows:
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Debt maturities of about NIS 160 million;
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Maintenance capital expenditures of about NIS 200 million.
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The Company’s financial covenants include maintaining a net debt to EBITDA ratio below 5x. As of the date of this report, the
Company meets this covenant with adequate headroom.
We consider environmental risks to have no effect on the rating. The Company’s operation is subject to a variety of government
laws and regulations regarding limitations on cellular networks due to non-ionizing radiation.
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We are affirming our ‘ilA+’ rating, identical to the issuer rating, on Partner’s unsecured bond series (Series D,F, G). The
recovery rating for these series is '3'.
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Our recovery prospect assessment is limited to the 50%-70% despite the simplified waterfall, due to or assessment that on
the path to default the Company will exchange unsecured debt for secured or senior debt.
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Hypothetic year of default: 2023
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A recession in the Israeli economy will lead to a decrease in consumption, to an increase in churn rates and to increased
competition in most segments, adversely affecting the Company's cash flows and liquidity, such that it is unable to meet its debt service payments.
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As one of the Israeli communication market leaders, the Company will continue operating as a going concern, and undergo
reorganization.
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EBITDA at emergence: about NIS 265 million
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EBITDA multiple: 6.0x
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Gross enterprise value as going concern: about NIS 1,590 million
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Administrative costs: 5%
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Net value available to unsecured creditors: about NIS 1,510 million
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Unsecured debt claims: about NIS 1,465 million
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Unsecured debt recovery expectation: 50%-70% (constrained as noted above)
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Unsecured debt recover rating (1 to 6): 3
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All debt amounts include six months' prepetition interest.
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www.maalot.co.il
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August 5, 2019 |5
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Partner Communications Company Ltd.
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Mapping Recovery Percentages To Recovery Ratings - Group A Jurisdiction
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| For issuers with a speculative-grade issuer credit rating |
| Nominal recovery expectations |
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| Recovery rating* | Recovery description | Greater than or equal to |
Less than | Issue rating notches relative to ICR |
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1+
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Highest expectation, full recovery
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100% |
N/A
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+3 notches
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1
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Very high recovery
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90% |
100%
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+2 notches
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2
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Substantial recovery
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70% |
90%
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+1 notch
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3
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Meaningful recovery
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50% |
70%
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0 notches
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4
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Average recovery
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30% |
50%
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0 notches
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5
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Modest recovery
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10% |
30%
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-1 notch
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6
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Negligible recovery
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0% |
10%
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-2 notch
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Recovery ratings are capped in certain countries to adjust for reduced creditor recovery prospects in these jurisdictions.
Recovery ratings on unsecured debt issues are generally also subject to caps (see Step 6, paragraphs 90-98 of Recovery Rating Criteria For Speculative-Grade Corporate Issuers, December 7, 2016, for further detail). ICR--Issuer credit rating.
Diversification/Portfolio effect: Neutral
Capital structure: Neutral Liquidity: Neutral Financial policy: Neutral
Management and governance: Neutral
Comparable rating analysis: Neutral
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Use Of CreditWatch And
Outlooks, September 14, 2009
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Methodology: Management And
Governance Credit Factors For Corporate Entities And Insurers, November 13, 2012
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Meth odology: Timeliness Of
Payments : Grace Periods , Guarantees , And Use Of ‘D’ And ‘ SD ’ Ratings , October 24, 2013
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Corporate Methodology, November 19, 2013
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Country Risk Assessment
Methodology And Assumptions, November 19,
2013
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Methodology: Industry Risk, November 19, 2013
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Key Credit Factors For The
Telecommunications And Cable Industry, June
22, 2014
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Methodology And Assumptions:
Liquidity Descriptors For Global Corporate Issuers, December 16, 2014
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Recovery Rating Criteria For
Speculative-Grade Corporate Issuers, December
7, 2016
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Methodology For National And
Regional Scale Credit Ratings, June 25,
2018
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Corporate Methodology: Ratios
And Adjustments, April 1, 2019
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Group Rating Methodology, July 1, 2019
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S&P Global Ratings
Definitions, October 31, 2018
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Rating Detail (As of 1-August-2019)
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Partner Communications Company Ltd.
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Issuer Credit Rating(s)
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Local Currency Long Term
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ilA+/Negative
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Issue Rating(s)
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Senior Unsecured Debt
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Series D,F,G
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ilA+
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Rating History
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Local Currency Long Term
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August 05, 2019
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ilA+/Negative
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July 28, 2015
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ilA+/Stable
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June 20, 2013
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ilAA-/Stable
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December 06, 2012
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ilAA-/Negative
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September 10, 2012
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ilAA-/Watch Neg
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October 19, 2010
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ilAA-/Negative
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October 05, 2009
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ilAA-/Stable
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September 17, 2009
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ilAA-
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July 14, 2009
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ilAA-/Watch Dev
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March 24, 2009
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ilAA-/Watch Pos
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October 28, 2008
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ilAA-/Stable
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September 25, 2007
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ilAA-/Positive
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March 20, 2007
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ilAA-/Stable
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July 28, 2004
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ilAA-
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February 16, 2004
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ilA+
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August 01, 2003
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ilA
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Other Details
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Time of the event
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05/08/2019 16:46
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Time when the analyst first learned of the event
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05/08/2019 16:46
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Rating requested by
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Issuer
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www.maalot.co.il
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August 5, 2019 |7
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Partner Communications Company Ltd.
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Credit Rating Surveillance
S&P Maalot is the commercial name of S&P Global Ratings Maalot Ltd. S&P Maalot conducts surveillance activities on
developments which may affect the creditworthiness of issuers and specific bond series which it rates, on an ongoing basis. The purpose of such surveillance is to identify parameters which may lead to a change in the rating.
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redistributors.
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www.maalot.co.il
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August 5, 2019 |8
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this Current Report to be signed
on its behalf by the undersigned, thereunto duly authorized.
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Partner Communications Company Ltd.
By: /s/ Tamir Amar
Name: Tamir Amar
Title: Chief
Financial Officer
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Dated: August 5, 2019