|
Fitch Rates AT&T's Proposed Debt Issuance 'A'
Fitch Ratings has assigned an 'A' rating to AT&T's proposed $1 billion
to $1.5 billion of five-year notes. Proceeds will be used for general
corporate purposes.
The Rating Outlook is Stable.
In a release, the company stated:
- AT&T's rating incorporates Fitch's expectations that, on a long-term
basis the company has the financial flexibility to maintain leverage in
a range appropriate for the current rating category. At the end of
third-quarter 2008 (3Q'08), leverage was 1.75 times (x), toward the
high end of Fitch's expectations for the rating category and higher
than AT&T's target level of 1.3x to 1.5x. Importantly, AT&T ceased
repurchasing common stock in 3Q'08, and reduced debt by $3.4 billion in
the quarter. Due to the continued stress in the credit and banking
markets, the company's current plans are to continue to direct free
cash flow toward debt reduction during the remainder of 2008. Fitch
notes that leverage is up primarily due to investments in the strongly
growing wireless business including spectrum acquisitions (the Federal
Communications Commission's 700 megahertz auction and Aloha Partners,
L.P.) and the acquisition of Dobson Communications; the pending
acquisition of Centennial Communications will also modestly boost
leverage in 2009. Fitch expects that EBITDA growth and potential debt
reduction will return AT&T's credit-protection metrics back into AT&T's
target range.
- AT&T's ratings also reflect its diversified revenue mix, its
significant size and economies of scale as the largest wireless,
wireline and enterprise services operator in the U.S., as well as
Fitch's expectation that AT&T will benefit from continued growth in
wireless operating cash flows. In 3Q'08, wireless segment revenues grew
15.4 percent while generating approximately 39 percent of total segment
revenues. In order to support the growth needs of its wireless business
and to remain competitive in future years through the deployment of
fourth-generation wireless technologies, AT&T spent approximately $9.1
billion in the first half of 2008 on wireless spectrum in the
700-megahertz frequency band.
- Issues to monitor regarding AT&T's ratings include competition in the
consumer line of business and the pressure of economic weakening on its
lines of business during the remainder of 2008 and in 2009. To offset
the effects of these factors on cash flow, AT&T must continue to be
successful in controlling costs, achieve merger-related synergies, and
successfully implement its network-based video strategy.
- At the end of 3Q'08, AT&T had $76.8 billion in debt outstanding, and
cash amounted to $1.6 billion. AT&T's liquidity is strong. To back its
commercial paper program, AT&T currently has a five-year credit
facility that expires in July 2011 with an estimated $9.4 billion of
availability (Lehman Brothers Bank composed $595 million of the
original $10 billion facility). The principal financial covenant in
both agreements requires debt-to-EBITDA, as defined in the agreements,
to be no more than 3x. For the last 12 months ending Sept. 30, AT&T
produced $2.9 billion in free cash flow after dividends. There has been
expense pressure on free cash flow in 2008 owing to subsidies AT&T is
providing in marketing the latest version of Apple's iPhone, but the
iPhone's strong sales should contribute to improved revenues and
profitability in 2009.
- AT&T's debt maturities in 2009 and 2010 are approximately $7.5
billion and $3.8 billion, respectively. The maturities incorporate debt
that can be put to AT&T, where appropriate.
Fitch's rating definitions and the terms of use of such ratings are
available on the agency's public site, fitchratings.com. Published
ratings, criteria and methodologies are available from this site, at
all times. Fitch's code of conduct, confidentiality, conflicts of
interest, affiliate firewall, compliance and other relevant policies
and procedures are also available from the "Code of Conduct" section of
this site.
((Comments on this story may be sent to newsdesk@closeupmedia.com))
((Distributed via M2 Communications Ltd - http://www.m2.com))
http://www.10meters.com
Comments on this story may be sent to newsdesk@closeupmedia.com
[ Back To Homepage ]
|
Home
Featured Article Archives
eNews
RSS FEED
