Partner Seeks NIS 500 Million Payout With New Debt

Partner is seeking another NIS 500 million payout after paying NIS 465 million in March, which would take total 2026 distributions to NIS 965 million if the court approves the application. The payout is not supported by operating cash alone. The forecast assumes NIS 750 million of new debt at 6% annual interest with no principal repayment for four years. Relative to the company's original scenario without the special distribution, year-end financial debt rises by NIS 550 million and net debt by NIS 517 million. Cash is actually NIS 33 million higher because part of the borrowing preserves the liquidity buffer rather than merely funding the dividend. The balance sheet enters the transaction from a strong position, with adjusted net debt to EBITDA of 0.4 at the end of March and substantial covenant headroom. However, the court has not approved the distribution, and its July 20 order only began the publication and objection process. The next evidence points are final approval, the actual financing terms and cash generation that covers investment, leases and debt service as forecast.

The Court Has Opened the Process, Not Approved the Payout

The July 20 court order directs the company to publish a creditor notice and establishes the timetable for objections and responses. Creditors may oppose the application within 30 days of its filing. This is a binding procedural step, but it is not permission to execute the distribution.

The economic opinion reaches a firmer conclusion. After reviewing a base case and two stress cases, the expert found no reasonable concern that the proposed distribution would prevent the company from meeting its liabilities. That finding supports the application, but it relies on an internal budget, continued financing access and operating assumptions that are not commitments from customers or lenders.

The distinction matters. The current event is not a completed court-approved dividend. It is an advanced application for a distribution that fails the profit test. The newly disclosed value for investors is the detail showing how Partner intends to fund the payment and what performance is required to rebuild cash afterward.

NIS 750 Million of Debt Keeps Cash Above the Original Case

The relevant measure is all-in cash flexibility, meaning cash remaining after investment, principal repayments, lease payments, interest and the distribution. It is not a measure of recurring cash generation before strategic uses.

The April to December 2026 forecast begins with NIS 337 million of cash. Sources include NIS 666 million of operating cash flow, NIS 6 million of interest received and NIS 750 million of new borrowing. Uses include NIS 349 million of investment, NIS 205 million of bond and bank-loan principal, NIS 87 million of lease principal, NIS 67 million of debt and lease interest and the NIS 500 million special distribution. Forecast year-end cash is NIS 551 million.

The comparison with the original company scenario clarifies the funding source:

It would therefore be inaccurate to attribute all NIS 750 million of borrowing to the distribution. The original scenario already assumed NIS 200 million of debt to maintain liquidity. The new plan adds NIS 550 million of debt against the baseline, funds an additional NIS 500 million payout and leaves NIS 33 million more in cash. Economically, shareholders receive cash now while the company preserves an operating buffer through a longer-dated liability.

The Budget Assumes Operations Refill the Cash Balance

The base case assumes 2026 revenue of NIS 3.256 billion, EBITDA of NIS 1.316 billion and free cash flow of NIS 347 million. Following first-quarter EBITDA of NIS 306 million, Partner needs to average roughly NIS 337 million in each of the remaining three quarters to reach the forecast annual level.

By 2030, revenue is expected to rise to NIS 3.772 billion, EBITDA to NIS 1.542 billion and free cash flow to NIS 656 million. The budget assumes a 24% mobile subscriber share, gradual pricing improvement, a recovery in roaming revenue, growth in internet and television subscribers, expansion in business data and activation of all 168,000 lines under the Bezeq IRU agreement. Annual capital expenditure remains high at NIS 466 million to NIS 483 million.

The forecast also includes a NIS 250 million company or business acquisition in 2027 and a positive contribution from that acquisition to revenue and profitability. Some of the growth through 2030 therefore comes from an asset that has not yet been acquired. The cash use is embedded in the solvency case even though no transaction has been signed.

Another detail changes the interpretation of the distribution. The forecast includes no further ordinary dividends after 2026. Any future payout requires a separate board decision and a renewed solvency review. The economic opinion therefore supports a one-time NIS 500 million distribution, not a recurring policy of similar annual payouts.

Four Years of Grace Push Principal Repayment to 2030

The model assumes 6% annual interest, four years without principal repayment and four equal annual installments beginning in 2030. Interest is paid in the intervening years, while most of the principal falls beyond the near-term forecast period. Debt service in the base case increases from NIS 118 million in 2029 to NIS 333 million in 2030 as repayment of the new principal begins.

The opinion says debt service was tested beyond 2030, but the downside cases expose another dependency. In the pessimistic case, where revenue is NIS 450 million below the base case by 2030, the model assumes NIS 900 million of borrowing in 2026 and another NIS 150 million in 2027. In the extreme case, where the revenue shortfall reaches NIS 600 million, it also assumes NIS 250 million in 2027 and another NIS 250 million across 2029 and 2030.

Both stress cases retain the potential NIS 250 million acquisition. That is conservative on cash uses, but solvency is maintained partly through additional borrowing on similar terms. Continued capital-market access is therefore central to the conclusion, rather than a remote backup option.

Other cited cushions include selling and leasing back mobile sites, postponing part of capital expenditure, factoring customer receipts and raising debt or equity. These are possible actions, not committed sources. Each also carries a future cost through rent, financing expense, delayed investment or dilution.

Covenants Are Distant, but Capital-Allocation Freedom Shrinks

The starting position supports the company's case. At the end of March, equity was NIS 1.934 billion, adjusted net debt to EBITDA was 0.4 and Partner complied with all financial covenants. The contractual leverage ceiling is 5, while dividend restrictions require post-distribution equity of at least NIS 750 million to NIS 850 million. S&P Maalot also affirmed its ilAA- rating with a stable outlook in May and expected the distribution to lift debt to EBITDA to 1.1 to 1.3, still consistent with the current rating.

Solvency is not the same as an economically costless payout. If Partner raises the debt on the modeled terms and delivers the budget, leverage should remain moderate and liquidity adequate. At the same time, it is exchanging part of its cash buffer and future capacity to fund network investment, acquisitions or dividends for an immediate shareholder payment. The next reports need to show free cash flow without the tax refund that supported the first quarter, investment in line with the forecast and net debt close to the 1.1 times EBITDA path. Financing pricing, final court approval and future payout decisions will determine how much flexibility remains after the cash leaves the company.