BT Group (LON:BT.A) faces a £2-billion cash bill over the next two years, potentially threatening the telco’s payout to shareholders, Moody’s has warned. The news comes after reports suggested earlier this week that the former telecoms monopoly was planning to reduce retirement payouts for about 80,000 members of its final-salary scheme.
BT’s share price has gained ground in today’s session, having added 0.60 percent to 284.05p as of 13:50 BST, largely in line with gains in the broader UK market, with the benchmark FTSE 100 index currently standing 0.58 percent higher at 7,365.23 points. The group’s shares have lost more than 27 percent over the past year, and are down by some 22 percent in the year-to-date.
City A.M. reported today that Moody’s had warned that BT was facing a £2-billion cash bill over the next two years to ease the concerns of its pension trustees. With around £1.4 billion of pension contributions already pencilled in over the next 24 months, the ratings agency argues that the former telecoms monopoly will need to mount a £600-million pre-tax raid on its in-demand cash coffers. Moody’s further warned that BT’s pension problem would, in part, sustain high debt levels and could lead to a reduction of the group’s payouts to shareholders.
“BT’s debt levels will stay high over the next two years as large pension deficits and stalling earnings add to existing regulatory, price and litigation risks, further weakening cash flow generation and delaying its ability to de-lever,” the ratings agency’s senior analyst Laura Perez said, as quoted by the newswire, adding that Moody’s expects that the FTSE 100 group might “seek to free up cash and pay down debt by accelerating convergence, reducing dividends or selling non-core assets”.