Canadian telecom major
Rogers Communication Inc
) is issuing C$1.1 billion senior notes, which will come up in two
separate tranche. The company will issue C$500 million of the
aggregate debt at an interest rate of 3%, due for payment on June
The remaining $600 million debt will carry an interest rate of
4% and is due for payment in June 2022. The offering, which is
expected to close on June 4, has yet to get regulatory
The first tranche of the issue is priced at $999.21 for every
$1,000 principal amount and have a yield to maturity of 3.017% per
annum, which is 165.1 basis point above the Canadian government's
benchmark rate. The second part of the issue is priced at $996 per
$1,000 principal amount and will yield an interest of 4.049% if
held till maturity, which is again 225.1 basis points over the
The company wants to utilize the proceeds to repay its
outstanding debt and to fully or partially fund its $533 million
investment in Maple Leaf Sports and Entertainment.
Rogers Communication exited the first quarter with a debt of
$10,194 million and cash and marketable securities of $1,165
million. The company's debt to capitalization ratio stood at 0.73
at the end of the reported quarter.
In the previous year, the telecom major had issued 10-year
unsecured notes of CAD1.45 billion and 30 year unsecured notes of
CAD400 million to pay back its 7.875% and 7.25% senior notes. We
believe that the issuance of this low interest instrument will
reduce the company's interest burden while keeping its debt to
capitalization ratio at the same level.
Wireless penetration in Canada is around 67%, which provides
significant growth opportunities for the company. Increased
adaptation of smartphones is also expected to create significant
tailwind for Rogers Communication.
Additionally, the company boasts of a good cash position, which
is reflected by its recent announcement to raise the annual
dividend by 11% to $1.58 per share and plans to buyback $1.0
billion of Class B non-voting shares during the year. However, the
company is facing increased competition due to the entry of rival
) in the cable sector.
Recommendation: We are maintaining our long-term Underperform
recommendation on Rogers Communication. Currently Rogers
Communication has a Zacks #5 Rank, implying a short-term Strong
Sell rating on the stock.
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