Moody’s Ratings has changed its outlook of satellite services provider SES S.A. (SES) and subsidiary SES AMERICON INC, from stable to negative.
The ratings agency cited risk factors including increased competition in the satellite market and innovation risks leading to likely sustained pressure on prices, which, it said, could increase the risk to SES’ ability to generate earnings growth and deleverage. In its report, Moody’s stated there had been a “significant reduction” in the company’s equity market valuation and noted that its proposed merger with Intelsat had already weakened the rating within its category, with an expected increase in net debt to support the $5 billion acquisition.
Ernest Bisagno, a Moody’s Ratings vice president, senior credit officer and lead analyst for SES, said, “The outlook change to negative reflects the increased risk in terms of operating performance and deleveraging path of the combined SES and Intelsat entity, owing to growing competition and higher innovation risk in the satellite industry. These considerations are impacting the business risk of the combined entity, and as a result, we have tightened the leverage tolerance for the rating, which further weakens the company’s position within the Baa3 category.”
Moody’s further pointed to a risk of oversupply in the market, but stated it expected growth at a “healthy rate” in the underlying connectivity market.
Noting the rating change, SES issued a statement in which it said it expects its Full Year 2024 Results to be better than expected with revenue at the high end of the financial outlook range (€1,940-2,000 million) and Adjusted EBITDA above the outlook range (€950-1,000 million).
SES added the Intelsat acquisition is on track to close during the second half of this year. The company expects to reconfirm all financial targets published in its April 2024 transaction announcement, including low to mid-single-digit average annual growth in revenue for 2024-28E, mid-single-digit average annual growth in adjusted EBITDA for the period and strong Free Cash Flow generation, it added.
SES will announce its results on 26th February.
