Reuters logo
Fitch Rates Verizon's Sr. Unsecured Offering 'A-'; Outlook Stable
May 12, 2017 / 9:01 PM / 7 months ago

Fitch Rates Verizon's Sr. Unsecured Offering 'A-'; Outlook Stable

(The following statement was released by the rating agency) CHICAGO, May 12 (Fitch) Fitch Ratings has assigned an 'A-' rating to Verizon Communications Inc.'s (NYSE: VZ) issuance of $1.5 billion senior unsecured floating rate notes due 2020. Proceeds will be used for general corporate purposes, which may include the repayment of outstanding debt. Verizon's Long-Term Issuer Default Rating (IDR) is 'A-', and the Rating Outlook is Stable. KEY RATING DRIVERS Competitive Position: The ratings are supported by Verizon Wireless's (VZW) strong competitive position, as evidenced through industry-low churn rates, high margins and the extensive coverage of approximately 98% of the U.S. population with its 4G LTE network. These factors are balanced against moderately high leverage for the rating, which stems from the February 2014 acquisition of the remaining 45% stake in VZW, as well as the intensely competitive wireless environment. Core Telecom Leverage: Including the effects of the Yahoo acquisition and data center sale, Fitch expects Verizon's core telecom leverage and total adjusted debt/EBITDAR to remain relatively stable in 2017, relative to year-end 2016 core telecom leverage of 2.4x and total adjusted debt/EBITDAR was 3.0x. Core telecom leverage excludes securitizations (both off-balance-sheet and public/144A and on-balance-sheet asset-backed securitizations). Securitizations are included in total adjusted debt/EBITDAR measures. Pending Yahoo! Acquisition: Verizon's acquisition of Yahoo! Inc.'s operating businesses is expected to close in the second quarter of 2017 (2Q17). In February 2017, the two parties amended their agreement following an investigation into two potentially separate incidents regarding the loss of certain customer data. The amended agreement lowered the price by $350 million to approximately $4.48 billion (subject to closing adjustments) and amended the terms regarding post-close liabilities. Data Center Sale: Verizon completed the $3.6 billion sale of its U.S. and Latin American data center sites to Equinix, Inc. on May 1, 2017. Straight Path Communications: Verizon has agreed to acquire the company in a $3.1 billion in an all-stock transaction. Straight Path holds millimeter wave licenses nationwide in the 39 GHz band and licences in major markets in the 28 GHz. The spectrum will be used to accelerate the deployment of 5G wireless services. KEY ASSUMPTIONS --Fitch assumes modest revenue and EBITDA growth for Verizon over the next few years as the effects of the transition to unsubsidized wireless service pricing and unlimited service plans wind down and as acquisitions contribute to growth. --Debt reduction in the core business, combined with EBITDA growth, is expected to reduce core telecom leverage. --VZW will continue to generate strong free cash flow (FCF) on an operational basis. VZW's simple FCF (EBITDA less capital spending) for the LTM ending March 31, 2017 was approximately $27.4 billion. --Fitch expects VZW's consolidated capital spending in 2017 to be within company guidance of $16.8 billion to $17.5 billion. Investment in the wireless network, including related investments in fiber, continues to be an area of emphasis due to the strong demand for 4G LTE capacity for rapidly growing data services. RATING SENSITIVITIES Positive Rating Action: Fitch believes a positive rating action is unlikely in the foreseeable future, given current levels of leverage. Negative Rating Action: Fitch may take a negative rating action if operating performance causes deleveraging to take place at a materially slower-than-anticipated pace, either alone or in combination with material debt-financed acquisitions. Discretionary management moves that cause core telecom leverage to rise above 2.5x, such as another material acquisition or stock repurchases, could lead to a negative action in the absence of a strong commitment to deleveraging. LIQUIDITY Strong Liquidity Profile: Verizon's liquidity is supported by its reported consolidated cash balance, which was $4.3 billion at March 31, 2017, and by its undrawn revolving credit facility (RCF). The RCF has availability of $9 billion and matures in September 2020. Fitch expects Verizon to maintain aggregate commercial paper (CP) balances within a level fully backed by the RCF. The credit facility has no ratings triggers or other restrictive financial covenants, such as leverage or interest coverage tests. Verizon's cash from operations in 2017 will be negatively affected by wireless handset financing under the equipment installment programs, as the public securitizations funding handset sales beginning in 3Q16 are recorded in cash from financing activities. Debt Maturities: On a consolidated basis, as of March 31, 2017, Verizon and its subsidiaries had expected debt maturities (excluding capital leases) of approximately $1.8 billion and $5.2 billion in 2017 and 2018, respectively. Contact: Primary Analyst John Culver, CFA Senior Director +1-312-368-3216 Fitch Ratings, Inc. 70 W. Madison Street Chicago, IL 60602 Secondary Analyst Bill Densmore Senior Director +1-312-368-3125 Committee Chairperson Michael Weaver Managing Director +1-312-368-3156 Media Relations: Alyssa Castelli, New York, Tel: +1 (212) 908 0540, Email: Date of Relevant Rating Committee: July 26, 2016 Summary of Financial Statement Adjustments - Financial statement adjustments that depart materially from those contained in the published financial statements of the relevant rated entity or obligor are disclosed below: --Securitized equipment installment receivables are not included in core telecom leverage and are included in off-balance sheet debt. Additional information is available on Applicable Criteria Corporate Rating Methodology - Including Short-Term Ratings and Parent and Subsidiary Linkage - Effective from 17 August 2015 to 27 September 2016 (pub. 17 Aug 2015) here Criteria for Rating Non-Financial Corporates (pub. 10 Mar 2017) here Additional Disclosures Solicitation Status here#solicitation Endorsement Policy here ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: here. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEB SITE AT WWW.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. DIRECTORS AND SHAREHOLDERS RELEVANT INTERESTS ARE AVAILABLE here. FITCH MAY HAVE PROVIDED ANOTHER PERMISSIBLE SERVICE TO THE RATED ENTITY OR ITS RELATED THIRD PARTIES. DETAILS OF THIS SERVICE FOR RATINGS FOR WHICH THE LEAD ANALYST IS BASED IN AN EU-REGISTERED ENTITY CAN BE FOUND ON THE ENTITY SUMMARY PAGE FOR THIS ISSUER ON THE FITCH WEBSITE. Copyright © 2017 by Fitch Ratings, Inc., Fitch Ratings Ltd. and its subsidiaries. 33 Whitehall Street, NY, NY 10004. Telephone: 1-800-753-4824, (212) 908-0500. Fax: (212) 480-4435. Reproduction or retransmission in whole or in part is prohibited except by permission. All rights reserved. In issuing and maintaining its ratings and in making other reports (including forecast information), Fitch relies on factual information it receives from issuers and underwriters and from other sources Fitch believes to be credible. Fitch conducts a reasonable investigation of the factual information relied upon by it in accordance with its ratings methodology, and obtains reasonable verification of that information from independent sources, to the extent such sources are available for a given security or in a given jurisdiction. The manner of Fitch’s factual investigation and the scope of the third-party verification it obtains will vary depending on the nature of the rated security and its issuer, the requirements and practices in the jurisdiction in which the rated security is offered and sold and/or the issuer is located, the availability and nature of relevant public information, access to the management of the issuer and its advisers, the availability of pre-existing third-party verifications such as audit reports, agreed-upon procedures letters, appraisals, actuarial reports, engineering reports, legal opinions and other reports provided by third parties, the availability of independent and competent third- party verification sources with respect to the particular security or in the particular jurisdiction of the issuer, and a variety of other factors. Users of Fitch’s ratings and reports should understand that neither an enhanced factual investigation nor any third-party verification can ensure that all of the information Fitch relies on in connection with a rating or a report will be accurate and complete. Ultimately, the issuer and its advisers are responsible for the accuracy of the information they provide to Fitch and to the market in offering documents and other reports. In issuing its ratings and its reports, Fitch must rely on the work of experts, including independent auditors with respect to financial statements and attorneys with respect to legal and tax matters. Further, ratings and forecasts of financial and other information are inherently forward-looking and embody assumptions and predictions about future events that by their nature cannot be verified as facts. As a result, despite any verification of current facts, ratings and forecasts can be affected by future events or conditions that were not anticipated at the time a rating or forecast was issued or affirmed. The information in this report is provided “as is” without any representation or warranty of any kind, and Fitch does not represent or warrant that the report or any of its contents will meet any of the requirements of a recipient of the report. A Fitch rating is an opinion as to the creditworthiness of a security. This opinion and reports made by Fitch are based on established criteria and methodologies that Fitch is continuously evaluating and updating. Therefore, ratings and reports are the collective work product of Fitch and no individual, or group of individuals, is solely responsible for a rating or a report. The rating does not address the risk of loss due to risks other than credit risk, unless such risk is specifically mentioned. Fitch is not engaged in the offer or sale of any security. All Fitch reports have shared authorship. Individuals identified in a Fitch report were involved in, but are not solely responsible for, the opinions stated therein. The individuals are named for contact purposes only. A report providing a Fitch rating is neither a prospectus nor a substitute for the information assembled, verified and presented to investors by the issuer and its agents in connection with the sale of the securities. Ratings may be changed or withdrawn at any time for any reason in the sole discretion of Fitch. Fitch does not provide investment advice of any sort. Ratings are not a recommendation to buy, sell, or hold any security. Ratings do not comment on the adequacy of market price, the suitability of any security for a particular investor, or the tax-exempt nature or taxability of payments made in respect to any security. Fitch receives fees from issuers, insurers, guarantors, other obligors, and underwriters for rating securities. Such fees generally vary from US$1,000 to US$750,000 (or the applicable currency equivalent) per issue. In certain cases, Fitch will rate all or a number of issues issued by a particular issuer, or insured or guaranteed by a particular insurer or guarantor, for a single annual fee. Such fees are expected to vary from US$10,000 to US$1,500,000 (or the applicable currency equivalent). The assignment, publication, or dissemination of a rating by Fitch shall not constitute a consent by Fitch to use its name as an expert in connection with any registration statement filed under the United States securities laws, the Financial Services and Markets Act of 2000 of the United Kingdom, or the securities laws of any particular jurisdiction. Due to the relative efficiency of electronic publishing and distribution, Fitch research may be available to electronic subscribers up to three days earlier than to print subscribers. For Australia, New Zealand, Taiwan and South Korea only: Fitch Australia Pty Ltd holds an Australian financial services license (AFS license no. 337123) which authorizes it to provide credit ratings to wholesale clients only. Credit ratings information published by Fitch is not intended to be used by persons who are retail clients within the meaning of the Corporations Act 2001

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below