Eyal Ben Simon, CEO of Phoenix (Photo by Fabian Koldorf, Magma Images)
After purchasing the assets of the Psagot investment house, the Fenix insurance company plans to raise a debt of NIS 100 million. The recruitment is considered small relative to the size of the Phoenix, but nevertheless what is interesting here is that the credit rating company Medrog raises the company’s debt rating, despite the fear of the approaching recession and despite the fact that the markets still do not make sounds of coming back to themselves.
The new credit rating of Hahnika is at Aa2 compared to the previous rating of Aa3.
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“The rating increase is supported by a high financial flexibility characterized by outstanding leverage and coverage ratios, and a liquidity profile characterized by a continuous improvement in the DSCR debt service ratio including liquid balances. In addition, there has been an improvement in the profile of the company’s holdings portfolio, which is reflected in the structural changes that have taken place in the group that have contributed to an improvement in the mix The portfolio of holdings, and with permanent visibility of receipts from the string of holdings except for the insurer.
“Also, the company has a significant portfolio of holdings in the insurance and finance industry, where its main holdings (the company has full control over all of them) are the Phoenix Insurance, the Phoenix Investment House, the Phoenix Pension and Provident Fund and the Phoenix Insurance Agencies, which constitute the main part of the value of the holdings in the books” write Madrog’s analysts.
“In the past year,” Madrog’s analysts say, “the company continued to operate within the framework of the strategic plan while completing structural changes and adding value to some of the holdings. The company has several additional holdings that contribute to diversifying the portfolio, the largest of which is Gamma Management and Clearing Ltd. (“Gamma”) (Aa3. il, stable), which operates in the field of non-bank credit mainly through the clearing of credit vouchers, financing against deferred relays and against real estate assets.
“In our baseline scenario for the years 2023-2024, we anticipate an aggregate amount of sources (in the next two years) of between NIS 1.4 and 1.5 billion. These will mainly result from current dividends from Phoenix Insurance, Phoenix Agencies, and Phoenix Investment House in an aggregate amount of approximately NIS 1.4 billion and annual interest payments of NIS 23 million in respect of additional tier 1 capital instruments issued to the company by the insurer.
“Also, we estimate that Phoenix Insurance is able to continue to maintain a wide gap from the regulatory requirements that will allow for continued distribution of dividends within the forecast range, in accordance with the established policy. The uses side mainly includes interest and principal payments with an aggregate amount of approximately 120 million shekels in the next two years, and without the assumption of substantial investments More in the forecast range. In this scenario, the interest coverage ratio (ICR) and the liquidity ratio (CASH+DSCR) are expected to move around 13 to 16 respectively, and are positively noticeable in relation to the rating and support the company’s rating increase.
“Also, the current debt service ratio (DSCR) is expected to range between 5-3.7, which supports financial flexibility and allows for the construction of the liquidity cushion, alongside the continued distribution of dividends from the company to the shareholders, according to the established policy. The liquidity profile stands out for the good and is supported by the balances Significant liquidity which supports the rating upgrade Midrog expects that the company will continue to maintain significant liquidity balances over time, also in view of the extent of the existing debt.
“The company has high financial flexibility, supported by a low leverage ratio (LTV), which is expected to move around 10% in our estimation, under several scenarios regarding the value of the holdings. However, the ratio of debt coverage to FFO is expected to move around 3.7 in 2023-2024, reflecting a good free flow in relation to the amount of the debt”.
On the other hand, the rating warns, “the company’s financial policy is low in relation to the rating, and reflects a certain business appetite for mergers and leveraged purchases, when the extent of the debt is not expected to decrease in the coming years. However, the financial policy is supported by market risk management and sufficient liquidity management, when the company has a dividend distribution policy annual of at least 30% of the total distributable profit according to the annual consolidated financial statements”.
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