Fitch downgrades Eutelsat SA and Eutelsat Communications ratings, outlook negative

Investing.com -- On March 6, 2025, Fitch Ratings downgraded the Long-Term Issuer Default Rating (IDR) of Eutelsat S.A. (ESA) to ’BB’ from ’BB+’ and Eutelsat Communications (OTC:EUTLF) S.A.’s (Eutelsat) IDR to ’B’ from ’B+’. The Outlooks for both companies are negative.

In addition, Fitch downgraded ESA’s senior unsecured debt rating to ’BB’ from ’BB+’, with the ’RR4’ Recovery Rating remaining unchanged. Eutelsat’s senior unsecured debt rating was downgraded to ’CCC+’ from ’B+’ and its Recovery Rating revised to ’RR6’ from ’RR4’.

The downgrade is due to OneWeb’s slow revenue growth, negative EBITDA, significant pressure in cash flow-generative GEO segments, high LEO capex requirements, and looming refinancing needs from 2027 onwards. The negative outlook reflects uncertainties over future funding and high execution risks around the company’s strategy to develop its LEO constellation in a competitive environment.

Fitch expects Eutelsat will need additional funding, estimated at EUR4.2 billion until 2032, for the continuity of OneWeb’s first-generation satellite constellation and to finance its contribution to the IRIS2 project. OneWeb alone needs EUR2 billion-EUR2.2 billion financing over 2025-2029, which may require primarily external funding due to limited internal cash flow circulation.

Eutelsat’s revenues from traditional GEO-enabled services are likely to remain under pressure, with the TV-related video segment hit by structurally lower usage of linear TV. At the end of 2024, Eutelsat recorded EUR535 million of goodwill impairments in respect of its GEO assets due to weaker demand for video and intensifying competition with LEO connectivity services.

Eutelsat’s group-wide consolidated credit profile corresponds to ’b+’, reflecting operating challenges in both the GEO and LEO segments, funding uncertainty over LEO constellations, likely increase in leverage, and looming refinancing risks in 2027.

Eutelsat’s liquidity will be helped by an expected EUR500 million of net proceeds from the sale of its passive infrastructure scheduled to take place in the first half of 2026. However, we project that Eutelsat’s group-wide net debt/EBITDA may increase to above 4.5x on weak EBITDA generation due to GEO pressures and continuing OneWeb losses.

Eutelsat’s strategy of developing a LEO constellation through the merger with OneWeb contrasts with SES S.A.’s focus on building a high-capacity medium-earth orbit constellation with reasonably low latency. Eutelsat has lower leverage than wider-diversified Viasat Inc. but has higher leverage than SES, faces higher execution risks around its LEO strategy and more challenging capex requirements.

Eutelsat had ample liquidity at the end of 2024, with EUR692 million of cash on its balance sheet, supported by a EUR450 million credit line maturing in April 2027 that can be extended for two 12-month periods on mutual consent, and an additional EUR100 million credit facility maturing in June 2027. Eutelsat is facing approximately EUR1 billion refinancing needs in June-July 2027, followed by EUR600 million bond maturities each in 2028 and 2029.

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