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Portugal Telecom to Focus on Repaying Debt Due to Ongoing European Debt Crisis
Published on:
Portugal Telecom has decided to pare back its dividend payments to shareholders and focus on paying down debt in order to deal with the current economic climate in Europe.
The company is effectively halving its dividend payout for fiscal years 2012 to 2014, although that will also be supplemented by a modest three year share buyback programme, amounting to EUR200 million.
The company will also raise an additional EUR250 million in debt, which wont mature until 2016.
In a statement, the Board of Directors said that they remain confident about PT´s cash flow generation but a more prudent financial strategy substantially reduces financial risks. The Company is now refinanced until the end of 2015, shall be reducing leverage and shall have more flexibility to continue to invest in the development of its business.
Fitch Ratings responded to the news, saying that the revisions were a sensible response in the face of the ongoing eurozone crisis.
Fitch estimated that the revised distribution policy which includes a dividend of EUR0.325, offset by buybacks, will preserve around EUR700m-EUR800m in cash over the three years.
With a further EUR1.6bn of maturities in 2014, the announced changes to distributions along with the proceeds of the proposed EUR250m fund raising should help address maturities in 2014.
The company is now refinanced until the end of 2015, which may help see it through the current European debt crisis.
Tags: [portugal telecom] [Portugal]
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