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

 


Chorus BBB debt rating affirmed by S&P, taken off watch

Chorus BBB debt rating affirmed by S&P, outlook negative on reduced headroom

By Jonathan Underhill

May. 23 (BusinessDesk) - Chorus's BBB credit rating was affirmed by Standard & Poor's with a negative outlook that reflects prospects for the network company's 'headroom' within financial covenants to shrink as it ramps up spending on the Ultra-Fast Broadband network and regulated prices fall.

The Wellington-based company was placed on creditwatch with negative implications in February, effectively giving it three months to convince S&P not to downgrade its credit rating.

"The rating affirmation reflects our view that Chorus has sufficient flexibility under a range of proposed revenue, cost, and capital management initiatives to temper the impact of reduced network pricing from December 2014 and maintain a financial risk profile consistent with the 'BBB' rating," credit analyst Paul Draffin said in a statement. "The negative outlook reflects the potential for the group’s headroom within bank facility financial covenants to materially diminish over the next few years."

Last year the Commerce Commission proposed cutting the network operator’s pricing on its copper line services, which Chorus said left a $1 billion hole in the funding for the roll out of the government-sponsored UFB.

In March, Crown Fibre Holdings gave Chorus greater flexibility in building the network provided it meets the agreed deadline, and has aligned funding with completed work.

Chorus is working through plans to cut costs and dividend cuts, raise capital, and renegotiate terms of its UFB contract, and has challenged the regulator in the Court of Appeal.

In January, Moody’s Investors Service’s downgraded Chorus to Baa3 from Baa2, the lowest possible investment grade rating.

Draffin said the Commerce Commission's review of its pricing methodology, with an outcome expected in April 2015, may result in more modest price cuts being imposed on Chorus but the ratings company's base case assumes no change and "significant uncertainty remains regarding the outcomes of this process."

"The negative outlook reflects our view that the rating could be lowered in the next six to 12 months due to the potential reduction in forecast covenant headroom during the peak of the UFB construction process; or if management’s strategies to support its financial risk profile are insufficient to maintain debt to Ebitda below 4" times.

Chorus shares fell 0.6 percent to $1.70 and have gained 19 percent this year.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Gareth Morgan: The Government’s Fresh Water Policy – Revisited

Fresh water quality is the latest area to be in the sights of Gareth Morgan and his research organisation The Morgan Foundation... They found that the fresh water policy was a bit murkier than the Environment Minister let on. More>>

ALSO:

Interest Rates: RBNZ Hikes OCR To 3.5%, ‘Period Of Assessment’ Now Needed

Reserve Bank governor Graeme Wheeler raised the official cash rate as expected, while signalling a pause in rate hikes to assess the impact of moves so far this year. The kiwi dollar sank after Wheeler said its strength was “unjustified” and that the currency could have “a significant fall.” More>>

ALSO:

Fonterra: Canpac Site 'Resize' To Focus More On Paediatrics

Fonterra is looking at realigning its packing operations at Canpac, in the Waikato, to focus more on paediatric nutritionals... The proposed changes could mean around 110 roles may not be required at the site which currently employs 330. More>>

ALSO:

Scoop Business: Postie Plus Brand Gets 2nd Chance With Well-Funded Pepkor

The Postie Plus brand is getting a new lease of life after South Africa’s Pepkor bought the failed retailer’s assets out of administration and said it will use its purchasing power to reduce costs of stock and fatten margins. More>>

ALSO:

Warming: Warming Signs From State Of Climate Report

Climate data from air, land, sea and ice in 2013 'reflect trends of a warming planet' -- says the latest State of the Climate report, launched by U.S. and New Zealand scientists. More>>

ALSO:

Scoop Business: Embrace Falling Home Affordability, Says NZIER

Despair over the inability to afford a house is misplaced and should be embraced as an opportunity to invest in more wealth-creating activity, says the principal economist at the New Zealand Institute of Economic Research, Shamubeel Eaqub. More>>

Productivity Commission: NZ Regulation Not Keeping Pace

New Zealand regulators often have to work with out-of-date legislation, quality checks are under strain, and regulatory workers need better training and development. More>>

ALSO:

Get More From Scoop

 
 
Computer Power Plus

Standards New Zealand

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