In a periodic assessment issued on Thursday, Moody’s pointed to the large shareholding in SES by the Luxembourg government (and state-backed financial outfits) as one of SES’s major credit strengths.
“The company’s strong position as a global market leader in satellite-based communications services” and strong financial discipline were also cited as positives.
Nevertheless, SES faces “increasing pricing pressure and decelerating growth in certain markets”.
Nearly €4.5bn in bonds
SES said it has €4,465m in debt as of 31 December 2017.
The credit ratings agency affirmed its Baa2 rating on the long-term bonds issued by SES. Baa2 is 9th highest score on Moody’s 21-rating scale. It is an “investment grade” rating; many institutional investors will only buy investment grade bonds.
Moody’s also reaffirmed a Ba1 score on SES’s hybrid bonds (which have some of the characteristics as shares). Ba1 is 11th highest rating, but is “non-investment grade”.
The agency gave a satisfactory P-2 rating on SES’s short-term debt (the scale runs from P-1 to P-3).
Moody’s said the outlook was “stable” for all three scores, meaning it does not expect to change the ratings in the immediate future.
Alejandro Núñez, Moody’s lead analyst covering SES, said in a statement on 18 January:
“The affirmation of SES’s ratings follows its recent designation by Moody’s as a Government-Related Issuer based on its approximately 20% ownership by the Luxembourg government. The affirmation at Baa2 with a stable outlook balances the negative impact on the rating of the company’s weaker operating trends and credit metrics with the positive impact on the rating derived from Moody’s assessment of the likely support from the Luxembourg government.”
State support has a possible future downside, however. If official institutions reduced their collective stakes in SES below roughly 20%, it “would likely result in a one-notch downgrade,” Moody’s stated.
Generally speaking, higher credit scores lets companies (or governments) borrow in capital markets at cheaper rates.