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.


© Scoop Media

Business Headlines | Sci-Tech Headlines


Postnatal Depression: 'The Thief That Steals Motherhood' - Alison McCulloch

Post-natal depression is a sly and cruel illness, described by one expert as ‘the thief that steals motherhood’, it creeps up on its victims, hiding behind the stress and exhaustion of being a new parent, catching many women unaware and unprepared. More>>


DIY: Kiwi Ingenuity And Masking Tape Saves Chick

Kiwi ingenuity and masking tape has saved a Kiwi chick after its egg was badly damaged endangering the chick's life. The egg was delivered to Kiwi Encounter at Rainbow Springs in Rotorua 14 days ago by a DOC worker with a large hole in its shell and against all odds has just successfully hatched. More>>


Trade: Key To Lead Mission To India; ASEAN FTA Review Announced

Prime Minister John Key will lead a trade delegation to India next week, saying the pursuit of a free trade agreement with the protectionist giant is "the primary reason we're going" but playing down the likelihood of early progress. More>>



MYOB: Digital Signatures Go Live

From today, Inland Revenue will begin accepting “digital signatures”, saving businesses and their accountants a huge amount of administration time and further reducing the need for pen and paper in the workplace. More>>

Oil Searches: Norway's Statoil Quits Reinga Basin

Statoil, the Norwegian state-owned oil company, has given up oil and gas exploration in Northland's Reinga Basin, saying the probably of a find was 'too low'. More>>


Modern Living: Auckland Development Blowouts Reminiscent Of Run Up To GFC

The collapse of property developments in Auckland is "almost groundhog day" to the run-up of the global financial crisis in 2007/2008 as banks refuse to fund projects due to blowouts in construction and labour costs, says John Kensington, the author of KPMG's Financial Institutions Performance Survey. More>>


Health: New Zealand's First ‘No Sugary Drinks’ Logo Unveiled

New Zealand’s first “no sugary drinks logo” has been unveiled at an event in Wellington... It will empower communities around New Zealand to lift their health and wellbeing and send a clear message about the damage caused by too much sugar in our diets. More>>


Get More From Scoop

Search Scoop  
Powered by Vodafone
NZ independent news