Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search

 


Moody’s cuts Chorus credit rating to Baa3 on regulatory risk

Moody’s cuts Chorus credit rating to Baa3 as regulatory risk looms

By Paul McBeth

Jan. 21 (BusinessDesk) - Moody’s Investors Service has cut Chorus’s credit rating a notch to the bottom of its investment grade band over the prospect of enforced price cuts to its copper line service.

The rating agency downgraded Chorus’s rating to Baa3 from Baa2, and kept a negative outlook, over the regulatory risk hanging over its earnings stream from services delivered on the copper network, and higher capital expenditure and operating expenses than originally anticipating, Moody’s said in a statement. The negative outlook was due to the uncertainty around whether Chorus can alleviate the regulatory risk, Moody’s said.

“The recent NZCC (New Zealand Commerce Commission) regulatory decision regarding UBA (unbundled bitstream access) pricing will have an adverse impact on Chorus’s financial profile, with annual EBITDA (earnings before interest, tax, depreciation and amortisation) decreasing by around 20 percent from 2015 absent measures being contemplated by Chorus,” senior analyst Maurice O’Connell said.

“As a consequence we expected adjusted financial leverage, measured as debt/EBITDA, will likely exceed the tolerance level set for Chorus’s Baa2 rating,” he said.

The rating agency anticipates Chorus’s leverage will likely increase as the fibre roll-out continues, and said the company’s banking covenants would be breached in 2015 if the network operator can’t alleviate the impact of the regulator’s decision.

The company’s shares fell 5.8 percent to $1.45 in trading today, and have gained 6.9 percent this year.

Chorus is in talks with Crown Fibre Holdings over its role in building the government-sponsored ultrafast broadband network after the Commerce Commission proposed slashing the network operator’s pricing on the regulated copper lines. That’s left a $1 billion hole in its funding to finance the roll-out, and Communications Minister Amy Adams has indicated she expects the company to fill some of that gap.

As part of its contract with Crown Fibre Holdings, Chorus has to maintain an investment grade credit rating if it wants to pay dividends to its shareholders without the Crown entity’s approval. Standard & Poor’s put Chorus’s BBB rating on CreditWatch negative in November.

Chorus chief financial officer Andrew Carroll said the downgrade was disappointing given the pricing decision doesn’t take effect until December this year, and that the company is still trying to mitigate the regulatory risk.

“We are assessing all options available to us, including cutting all discretionary activity, re-pricing commercial services, generally managing for cash and assessing capital management options,” Carroll said.

“We have also commenced constructive discussions with Crown Fibre Holdings. While this work continues, we cannot finalise our medium term strategy or capital management settings,” he said.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Forestry: Man Charged After 2013 Death

Levin Police have arrested and charged a man with manslaughter in relation to the death of Lincoln Kidd who was killed during a tree felling operation on 19 December 2013. More>>

ALSO:

Smells Like Justice: Dairy Company Fined Over Odour

Dairy company fined over odour Dairy supply company Open Country Dairy Limited has been convicted and fined more than $35,000 for discharging objectionable odour from its Waharoa factory at the time of last year’s ”spring flush” when milk supply was high. More>>

Scoop Business: Dairy Product Prices Decline To Lowest Since July 2012

Dairy product prices dropped to the lowest level since July 2012 in the latest GlobalDairyTrade auction, led by a slump in rennet casein and butter milk powder. More>>

ALSO:

SOE Results: TVNZ Lifts Annual Profit 25% On Flat Ad Revenue, Quits Igloo

Television New Zealand, the state-owned broadcaster, lifted annual profit 25 percent, ahead of forecast and despite a dip in advertising revenue, while quitting its stake in the pay-TV Igloo joint venture with Sky Network Television. More>>

ALSO:

Insurers Up For More Payouts: Chch Property Investor Wins Policy Appeal In Supreme Court

Ridgecrest NZ, a property investor, has won an appeal in the Supreme Court over insurance cover provided by IAG New Zealand for a Christchurch building damaged in four successive earthquakes. More>>

ALSO:

Other Cases:

Royal Society: Review Finds Community Water Fluoridation Safe And Effective

A review of the scientific evidence for and against the efficacy and safety of fluoridation of public water supplies has found that the levels of fluoridation used in New Zealand create no health risks and provide protection against tooth decay. More>>

ALSO:

Scoop Business: Croxley Calls Time On NZ Production In Face Of Cheap Imports

Croxley Stationery, whose stationery brands include Olympic, Warwick and Collins, plans to cease manufacturing in New Zealand because it has struggled to compete with lower-cost imports in a market where the printed word is giving way to electronic communications. More>>

ALSO:

Prefu Roundup: Forecasts Revised, Surplus Intact

The National government heads into the election with its Budget surplus target broadly intact, delivering a set of economic and fiscal forecasts marginally revised from May to reflect weaker commodity prices and a lower tax take. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

Standards New Zealand
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news