(The following statement was released by the rating agency)
June 05 - Standard & Poor’s Ratings Services said today that its ratings and outlook on Spanish telecoms operator Telefonica S.A. (BBB/Negative/A-2) remain unchanged following the company’s recent announcement that it intends, among other things, to propose a scrip dividend for part of the 2012 shareholder remuneration to be paid in May 2013.
We consider this measure to be positive for liquidity. We estimate it could save between EUR2 billion and EUR4 billion in cash outflows in 2013, assuming a success rate between 50% and 100%. In addition, this would be positive for leverage, and would reduce the likelihood that the adjusted ratio of debt to EBITDA would deteriorate to above 3.3x, a level we see as a maximum for the current rating. Last, we believe that it illustrates management’s readiness to take extraordinary measures in order to strengthen liquidity and contain debt leverage.
At this stage, however, we think the ultimate amount of cash savings is uncertain, and that the near-term development of the very challenging domestic market, and subsequently the group’s cash flow generation, remains unclear. In addition, we think that active refinancing initiatives will continue to be required. The group has heavy long-term debt maturities of EUR7 billion-EUR8 billion annually and will need to renew a large part of its undrawn bank facilities in the next two years.