Partner Seeks Court Approval to Pay Dividend via Debt Despite Profit Test Failure

Since taking control of Partner Communications, the Ampissa Group, consisting of companies linked to Shlomo Rodev, Roni Gat, Partner CEO Avi Gabay, Mori Arkin, and Phoenix, has focused on reducing the telecom company's debt. Over four years, Partner's debt ratio steadily declined, making it the largest telecom firm with the lowest leverage in the sector. However, on Monday, the company announced it filed a request with the court to distribute a special dividend of 500 million shekels funded by issuing 750 million shekels in debt, which would increase its debt ratio for the first time since acquisition.

This move is unusual in the capital market as Israeli law requires dividend payments to come from profits (the "profit test") unless the company obtains court approval after proving no reasonable risk to its ability to meet current and future obligations (the "solvency test"). Creditors may object, and the court can approve, reject, or condition the request. Similar cases have been approved before, such as by Bezeq. While paying dividends from debt reduces equity and raises risk, it can signal management's confidence in future cash flows. Following the announcement, Partner's shares rose.

Partner resumed dividend payments in 2025 for the first time since 2012, after halting them due to fierce market competition and price wars. Since then, dividends totaling 168 million shekels have been paid to Ampissa, the controlling shareholder. Partner is valued at over 7 billion shekels, with Ampissa's paper gains around 750 million shekels. If approved, Ampissa's dividend share would be about 106 million shekels, boosting its investment returns.

According to S&P Maalot, Partner's debt-to-EBITDA ratio was 0.7 at the end of 2025 and is expected to rise to 1.1 next year due to bond issuance, the highest in three years. The company forecasts this ratio will moderate to 0.4 by 2028 but could spike to 1.8 in a worst-case scenario. Partner projects strong cash flows through 2028 and plans a 750 million shekel bond issuance with an estimated 6% interest rate. It also disclosed a conservative 250 million shekel reserve for potential acquisitions in 2027, though no specific deals are planned.

Partner included an expert opinion from Prof. Zvi Wiener of the Hebrew University, who found no reasonable concern about solvency from the dividend plan. The S&P rating report (ilAA minus) warns of a downgrade if debt-to-EBITDA exceeds 2 long-term, which is unlikely even in adverse scenarios. Partner expects steady revenue growth to 3.67 billion shekels by 2030, with EBITDA margins of 40-41% and net profit rising from 304 million shekels in 2025 to 544 million in 2030.

Financial analyst Lior Wider praised the move, highlighting Partner's under-leverage compared to competitors Bezeq and Cellcom, whose debt ratios stand at 2.2-2.3. He noted the company's strong liquidity and flexibility to reward shareholders and pursue acquisitions without jeopardizing long-term stability.