Welcome!

News Feed Item

Fitch Rates AT&T's Senior Unsecured Notes Offering 'A'; Outlook Negative

Fitch Ratings has assigned an 'A' rating to AT&T Inc.'s (AT&T) offering of $2.25 billion of senior unsecured notes due 2016. The offering consists of $1 billion 0.9% fixed rate notes and $1.25 billion of floating rate notes. Proceeds are expected to be used for general corporate purposes. AT&T's Issuer Default rating (IDR) is 'A', and the Rating Outlook is Negative.

Key Rating Drivers

The rating is supported by:

--AT&T's financial flexibility;

--The company's diversified revenue mix;

--Its significant size and economies of scale as the largest telecommunications operator in the U.S.; and

--Fitch's expectation that AT&T will benefit from continued growth in wireless operating cash flows.

The following concern is embedded in the rating:

--The Negative Outlook reflects Fitch's expectation that AT&T's net leverage is likely to move up to a 1.8x upper boundary for leverage, which represents a notable increase from the 1.5x level over the past couple of years.

AT&T's increased leverage is expected to arise from the combined effects of a moderate increase in wireless and wireline capital spending and the continuation of the company's share repurchase program as announced in early November 2012. Prospective leverage expectations are subject to uncertainty caused by the rate of stock repurchases, actual capital expenditure levels, possible acquisitions (such as longer-term spectrum needs) and asset divestitures (of which there are none in Fitch's expectations).

In January 2013, AT&T announced two transactions to improve its wireless spectrum position. Subject to regulatory approval, AT&T will acquire certain rural wireless assets and spectrum from Atlantic Tele-Network, Inc. for $780 million in cash. Additionally, the company has a pending transaction to acquire certain B-block 700 MHz licenses from Verizon Wireless for $1.9 billion in cash and certain Advanced Wireless Services spectrum licenses in several markets. In Fitch's view, the proposed acquisitions are strategically sound as they are supportive of wireless growth. The transactions, if completed, are not currently expected to push the company's credit metrics above the 1.8x net leverage level.

For 2013, Fitch expects AT&T's gross leverage to approximate 1.7x, flat with 2012 (excluding the actuarial losses on its benefit plans). Net leverage in 2012 was 1.58x. Over the next few years, AT&T's continuation of stock repurchases will require some borrowing as repurchases will be above FCF levels. Leverage will rise, with net leverage expected to peak near a 1.8x upper boundary in 2014. Thereafter, leverage is expected to decline over time.

In Fitch's view, liquidity is strong and provided by the company's FCF; additional financial flexibility is provided by availability on the company's revolving credit facilities. At Dec. 31, 2012, total debt outstanding was approximately $69.8 billion, a $5 billion rise from the $64.8 billion outstanding at the end of 2011. Of the total amount outstanding, $3.5 billion consists of debt due within one year, including debt that can be put to the company. At Dec. 31, 2012, cash amounted to $4.9 billion, and for 2012, AT&T produced $9.2 billion in FCF (net cash provided by operating activities less capital expenditures and dividends), an amount short of the $12.8 billion in stock repurchases during the year. Fitch expects FCF to decline from $9.2 billion in 2012 to $4 billion annually, on average, over the next three years.

At end of 2012, the company did not have any drawings on its revolving credit facilities. The principal financial covenant for the 2016 and 2017 facilities requires debt to EBITDA, as defined, to be no more than 3x.

Relative to the company's expected free cash flows, upcoming debt maturities are manageable. In 2013, debt maturities approximate $3.4 billion, including approximately $1.6 billion in debt that may be put to the company. Maturities amount to $3.8 billion in 2014.

Rating Sensitivities

The Rating Outlook could be revised to Stable if:

--The company steadily manages net leverage down from Fitch's expected peak just under 1.8x in 2014;

--Fitch believes leverage will not reach peak levels as a result of the outcome of the following factors, including, but not limited to, stronger operating results, lower capital spending, and the effect of any acquisitions or divestitures that may occur.

A negative rating action could occur if:

--Net leverage remains above (or is expected to remain above) the 1.8x level for several quarters, including expected leverage resulting from a material transaction;

--Fitch believes management has weakened its commitment to returning to, or operating longer-term with, leverage at a level more reflective of the rating.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 8, 2012);

--'Rating Telecom Companies - Sector Credit Factors' (Aug. 9, 2012).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

Rating Telecom Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682323

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE '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.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

Latest Stories
SYS-CON Events announced today that Synametrics Technologies will exhibit at SYS-CON's 22nd International Cloud Expo®, which will take place on June 5-7, 2018, at the Javits Center in New York, NY. Synametrics Technologies is a privately held company based in Plainsboro, New Jersey that has been providing solutions for the developer community since 1997. Based on the success of its initial product offerings such as WinSQL, Xeams, SynaMan and Syncrify, Synametrics continues to create and hone in...
Smart cities have the potential to change our lives at so many levels for citizens: less pollution, reduced parking obstacles, better health, education and more energy savings. Real-time data streaming and the Internet of Things (IoT) possess the power to turn this vision into a reality. However, most organizations today are building their data infrastructure to focus solely on addressing immediate business needs vs. a platform capable of quickly adapting emerging technologies to address future ...
In his general session at 21st Cloud Expo, Greg Dumas, Calligo’s Vice President and G.M. of US operations, discussed the new Global Data Protection Regulation and how Calligo can help business stay compliant in digitally globalized world. Greg Dumas is Calligo's Vice President and G.M. of US operations. Calligo is an established service provider that provides an innovative platform for trusted cloud solutions. Calligo’s customers are typically most concerned about GDPR compliance, application p...
No hype cycles or predictions of a gazillion things here. IoT is here. You get it. You know your business and have great ideas for a business transformation strategy. What comes next? Time to make it happen. In his session at @ThingsExpo, Jay Mason, an Associate Partner of Analytics, IoT & Cybersecurity at M&S Consulting, presented a step-by-step plan to develop your technology implementation strategy. He also discussed the evaluation of communication standards and IoT messaging protocols, data...
The dynamic nature of the cloud means that change is a constant when it comes to modern cloud-based infrastructure. Delivering modern applications to end users, therefore, is a constantly shifting challenge. Delivery automation helps IT Ops teams ensure that apps are providing an optimal end user experience over hybrid-cloud and multi-cloud environments, no matter what the current state of the infrastructure is. To employ a delivery automation strategy that reflects your business rules, making r...
Modern software design has fundamentally changed how we manage applications, causing many to turn to containers as the new virtual machine for resource management. As container adoption grows beyond stateless applications to stateful workloads, the need for persistent storage is foundational - something customers routinely cite as a top pain point. In his session at @DevOpsSummit at 21st Cloud Expo, Bill Borsari, Head of Systems Engineering at Datera, explored how organizations can reap the bene...
Kubernetes is an open source system for automating deployment, scaling, and management of containerized applications. Kubernetes was originally built by Google, leveraging years of experience with managing container workloads, and is now a Cloud Native Compute Foundation (CNCF) project. Kubernetes has been widely adopted by the community, supported on all major public and private cloud providers, and is gaining rapid adoption in enterprises. However, Kubernetes may seem intimidating and complex ...
In a recent survey, Sumo Logic surveyed 1,500 customers who employ cloud services such as Amazon Web Services (AWS), Microsoft Azure, and Google Cloud Platform (GCP). According to the survey, a quarter of the respondents have already deployed Docker containers and nearly as many (23 percent) are employing the AWS Lambda serverless computing framework. It’s clear: serverless is here to stay. The adoption does come with some needed changes, within both application development and operations. Tha...
In his session at 21st Cloud Expo, Michael Burley, a Senior Business Development Executive in IT Services at NetApp, described how NetApp designed a three-year program of work to migrate 25PB of a major telco's enterprise data to a new STaaS platform, and then secured a long-term contract to manage and operate the platform. This significant program blended the best of NetApp’s solutions and services capabilities to enable this telco’s successful adoption of private cloud storage and launching ...
The past few years have brought a sea change in the way applications are architected, developed, and consumed—increasing both the complexity of testing and the business impact of software failures. How can software testing professionals keep pace with modern application delivery, given the trends that impact both architectures (cloud, microservices, and APIs) and processes (DevOps, agile, and continuous delivery)? This is where continuous testing comes in. D
The 22nd International Cloud Expo | 1st DXWorld Expo has announced that its Call for Papers is open. Cloud Expo | DXWorld Expo, to be held June 5-7, 2018, at the Javits Center in New York, NY, brings together Cloud Computing, Digital Transformation, Big Data, Internet of Things, DevOps, Machine Learning and WebRTC to one location. With cloud computing driving a higher percentage of enterprise IT budgets every year, it becomes increasingly important to plant your flag in this fast-expanding busin...
You know you need the cloud, but you’re hesitant to simply dump everything at Amazon since you know that not all workloads are suitable for cloud. You know that you want the kind of ease of use and scalability that you get with public cloud, but your applications are architected in a way that makes the public cloud a non-starter. You’re looking at private cloud solutions based on hyperconverged infrastructure, but you’re concerned with the limits inherent in those technologies.
Nordstrom is transforming the way that they do business and the cloud is the key to enabling speed and hyper personalized customer experiences. In his session at 21st Cloud Expo, Ken Schow, VP of Engineering at Nordstrom, discussed some of the key learnings and common pitfalls of large enterprises moving to the cloud. This includes strategies around choosing a cloud provider(s), architecture, and lessons learned. In addition, he covered some of the best practices for structured team migration an...
With tough new regulations coming to Europe on data privacy in May 2018, Calligo will explain why in reality the effect is global and transforms how you consider critical data. EU GDPR fundamentally rewrites the rules for cloud, Big Data and IoT. In his session at 21st Cloud Expo, Adam Ryan, Vice President and General Manager EMEA at Calligo, examined the regulations and provided insight on how it affects technology, challenges the established rules and will usher in new levels of diligence arou...
Most technology leaders, contemporary and from the hardware era, are reshaping their businesses to do software. They hope to capture value from emerging technologies such as IoT, SDN, and AI. Ultimately, irrespective of the vertical, it is about deriving value from independent software applications participating in an ecosystem as one comprehensive solution. In his session at @ThingsExpo, Kausik Sridhar, founder and CTO of Pulzze Systems, discussed how given the magnitude of today's application ...