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08 Mar 2011
C$1.850 billion in new debt instruments rated
Toronto, March 08, 2011 -- Moody's Investors Service (Moody's) assigned a Baa2 rating to Rogers Communications
Inc.'s (Rogers) new senior unsecured debt issues, C$1.45
billion of 5.34% notes due 2021 and C$400 million
of 6.56% notes due 2041. The ratings outlook is stable.
With substantially all of the proceeds used to refinance existing debt,
the new issues are neutral to Rogers' consolidated credit profile
and the new notes are rated at the same Baa2 level as the balance of the
company's senior unsecured debt.
On February 11, 2011, Rogers issued notices to redeem all
of its US$350 million 7.875% senior notes due 2012
as well as its US$470 million 7.25% senior notes
due 2012. In addition to fees and expenses, there are call
premia and related derivative exposures to be addressed (Moody's
considers the derivative exposure to be equivalent to debt). Rogers
also has substantial drawings under its C$2.4 billion revolving
term loan facility that is committed to July 2, 2013. With
the company allocating excess cash flow to shareholders, the drawings
relate primarily to the January 4, 2011 acquisition of Atria Networks
LP. The new debt issues will refinance the above-noted amounts
with perhaps a small surplus remaining for general corporate purposes,
and are, therefore, and as noted above, neutral to Rogers
..Issuer: Rogers Communications Inc.
....Senior Unsecured Regular Bond/Debenture,
SUMMARY RATING RATIONALE
Rogers' senior unsecured rating is Baa2. Rogers has a solid business
profile that combines Canada's largest wireless services operation with
one of the country's largest cable television operations. Revenues
and cash flow have grown as the customer base and economy have expanded,
by increased penetration of homes passed, and by new services enabled
by advancing technology. As well, Canadian Government oversight
of the telecommunications and cable sectors has historically been supportive,
and with competition somewhat limited as a result, margins have
been strong. Further, given the quasi-essential nature
of telecommunications and cable services, operating cash flow has
been generally quite stable through economic cycles. In addition
to continuity of these influences, the Baa2 rating reflects management's
commitment to an investment grade profile and adherence with publicly
disseminated financial policies. The company's 2.0-to-2.5x
net debt to adjusted operating profit financial leverage target is,
incorporating Moody's standard adjustments, approximately equal
to debt-to-EBITDA of 2.1-to-2.6x,
a range appropriate for a Baa2-rated telecommunications company
in Rogers' circumstance. Rogers also has media operations,
however, we see these as being dilutive to the rating given their
volatility, uncertain competitive stature, lack of complimentary
contribution, and the management and cash resources they consume.
The rating outlook is stable, reflecting expectations of a stable
business platform, leverage that is relatively consistent and within
the bounds of the company's target leverage range, and ample liquidity.
What Could Change the Rating - Up
Given the company's clear plan to operate within its leverage targets,
it is not likely that the ratings would be subject to upwards pressure.
However, presuming solid industry fundamentals, were we to
expect Rogers to operate consistently at Debt/EBITDA of 2x or below,
positive ratings pressure would develop. Alternatively, dramatic
improvements in operational and financial performance might also be representative
of an improving risk profile and could generate positive ratings pressure.
What Could Change the Rating - Down
Rogers' ratings could be downgraded in the event FCF/Debt was more likely
to be in the 5% range on a sustainable basis, or if Debt/EBITDA
was expected to be sustained closer to (or above) 3.0x.
Adverse liquidity developments or material debt-financed acquisitions
could also result in negative ratings actions. So too would reduced
operational and financial performance; irrespective of Debt/EBITDA,
if financial flexibility is constrained as financial results deteriorate,
adverse ratings action are possible.
Rogers Communications Inc., headquartered in Toronto,
Ontario, is a communications company that operates as Rogers Wireless,
Canada's largest wireless operator (56% of revenues), Rogers
Cable, Canada's largest cable company (32% of revenues),
and Rogers Media, which owns radio, television, sports
and publishing assets (12% of revenues).
Donald S. Carter, CFA
MD - Corporate Finance
Corporate Finance Group
Moody's Canada Inc.
VP - Senior Credit Officer
Corporate Finance Group
Moody's Canada Inc.
Moody's Canada Inc.
Moody's rates Rogers' new senior unsecured notes Baa2
70 York Street
Toronto, ON M5J 1S9
No Related Data.
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