A2/BBB+[N] EUR Spreads 1-2bps tighter

Proximus bonds are streaming 1-2bps tighter in line with the market implying some may have expected this or even feared a worse outcome though we note that the issuer remains very near to the leverage thresholds, heightening the focus on any marginal changes in leverage from here.

• Negative outlook reflects risk of downgrades if Proximus fails to deliver on strategic plans, including disposals and synergies from Route Mobile acquisition while competitive pressure from new market entrant Digi adds uncertainty.
• Comes after Proximus acquired the remaining 50% of Fiberklaar in July for EUR 246mn and Route Mobile in June for EUR 636mn, funded with EUR 700mn of unsecured notes, raising leverage concerns.
• We noted at the times that Proximus leverage (reported as per the S&P definition) was 2.6x at FY23 with initial FY24 guidance of ~2.7x as of Feb which was raised to “expected to land between 2.9-3x” on the June announcement and ~3.1x as of Q2 results in July against a 2.5-3x target.
• S&P only a slight improvement to around 3x in 2025-2026 against thresholds of a “prolonged basis” above 3x and “comfortably and sustainably below” 3x.
• Anticipated capex of EUR 1.3bn-1.4bn for 2024-2025 is up from EUR 1.2bn due to the Fiberklaar consolidation, impacting free cash flow; disposals of EUR 500mn planned (increased by EUR 100mn at Q2), possibly including the company HQ on which a deal fell through in August, to mitigate leverage.