Partner Telecom Clears Debt for 500M Shekel Dividend Payout

Partner Communications is moving decisively to unlock a significant dividend distribution, clearing outstanding debt obligations to bondholders who opposed the payout. The Israeli telecom giant announced it will redeem Series Z bonds, representing a principal repayment of approximately 344 million shekels (roughly $93 million USD), to extinguish opposition to its planned special dividend.

This strategic move follows a similar early redemption of Series H bonds, totaling 140 million shekels (approximately $38 million USD), which also faced resistance from its holders. By addressing these creditor concerns, Partner aims to pave the way for the court-approved distribution of a special dividend totaling 500 million shekels (around $135 million USD). The company plans to finance this payout through a new debt issuance of 750 million shekels.

The dividend plan, initially proposed by CEO Avi Gabbay, encountered hurdles when required supermajority approvals from bondholder assemblies were not met. In the case of Series H, a majority of bondholders actually voted against the distribution. For Series Z, while a majority voted in favor, it fell short of the two-thirds threshold necessary for approval. Partner's proactive approach in redeeming these bonds demonstrates a strong commitment to executing its capital return strategy.

The primary beneficiary of this substantial dividend is expected to be the controlling shareholder group, Amphissa. This consortium, comprising entities linked to Shlomo Rodav, Roni Gat, Mori Arkin, and The Phoenix, along with CEO Gabbay, holds a 21.2% stake in Partner. Their share of the proposed 500 million shekel dividend is projected to be around 106 million shekels (approximately $29 million USD).

Amphissa acquired its controlling interest in Partner in April 2022 for approximately 960 million shekels. This planned distribution marks a significant capital return following a period where Partner resumed dividend payments in 2023 after a decade-long hiatus, distributing 250 million shekels. Earlier this year, an additional 465 million shekels was distributed based on the prior year's financial performance. These distributions, coupled with the company's valuation growth, have reportedly generated substantial paper gains for Amphissa.

The telecommunications sector in Israel, like globally, is navigating intense competition and evolving technological demands. Companies are increasingly focused on optimizing capital structures and returning value to shareholders. Partner's aggressive dividend strategy, funded partly by new debt, reflects a confidence in its operational performance and future cash flow generation capabilities, even as it manages its debt profile. The successful completion of this dividend hinges on final court approval, but the company has taken significant steps to preemptively resolve creditor objections.