Analysts said the fourth quarter results illustrated how Verizon is facing intensifying competition from wireless rivals. — Reuters
More Protection
On Friday, Verizon bondholders were pressing for more protections in a proposed $29 billion debt swap that was launched earlier in the week, people with knowledge of the situation said. The investors are seeking to add terms to the new debt they would swap into, such as a step-up coupon in case of a Charter deal, they said. That provision would allow investors to earn higher interest if the company’s credit ratings are cut after an acquisition.
On Tuesday, Verizon’s chief financial officer discussed his ambitions to improve the company’s credit ratings. It is seeking to win back the credit rating profile it had before its purchase of Vodafone Group Plc’s stake in Verizon Wireless, by 2018 or 2019, said CFO Matt Ellis.
It currently has a BBB+ rating from S&P Global Ratings and a Baa1 rating from Moody’s Investors Service, the third lowest investment grade level at each.
Verizon has been willing to make big debt-funded purchases before. It sold a record $49 billion of bonds in 2013 to help finance its 2014 purchase of Vodafone’s interest in Verizon Wireless.
In this case, “the market is going to require much higher interest because the riskiness of the company will have increased substantially,” Dave Novosel, a bond analyst at Gimme Credit, said. “They will have to pay up significantly versus where they are now.”
A combination of Verizon and Charter would follow several recent industry mega-mergers, including Charter’s acquisition of Time Warner Cable and Bright House Networks, as cable and wireless companies explore closer ties to combat slowing revenue growth. - Bloomberg
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