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

 


Chorus suspends dividend payments, tweaks banking covenants

Chorus suspends dividend payments, tweaks banking covenants

By Paul McBeth

Jul. 25 (BusinessDesk) - Chorus, the telecommunications network operator, has suspended dividend payments as regulatory uncertainty weighs on its balance sheet, and has renegotiated its banking covenants to give it some financial breathing space.

The Wellington-based company won't pay a dividend until June 30, 2015 or the conclusion of the Commerce Commission's final ruling on how much Chorus can charge customers on its regulated copper-based services, whichever is the later, it said in a statement. It has also amended the terms of its bank debt to allow for weaker earnings relative to its borrowings, and will limit how much it draws on the facilities until the commission's review process is completed.

"The changes we have agreed with the banks reflect Chorus's focus on achieving financial stability, particularly with the Commerce Commission's pricing review process now scheduled to continue through to April next year," chief financial officer Andrew Carroll said. "We also have an extensive range of operating cost, capital expenditure and revenue initiatives in train to help address this ongoing period of price uncertainty."

Last week Chorus cut a deal with Crown Fibre Holdings, the government entity funding the ultrafast broadband build, to let the network operator bring forward funding of $178 million to ensure it has the cash to build the bulk of the national fibre network. If Chorus draws on the funding it won't be able to pay a dividend without Crown Fibre Holdings' permission before December 2019.

Today's announcement increases Chorus's bank covenant levels to 4.25 times net debt to earnings before interest, tax, depreciation and amortisation at pricing levels in line with the regulator's initial decision, from its current 3.75 times. It also extends the maturity of the facility to July 31, 2016 from November 2015, and waives rights potentially available to the banks associated with the material reduction set to take effect from December this year.

Chorus committed to limit total drawings to $1.2 billion across all facilities until the regulator's decision is made, and has reduced its July 2016 facility by $100 million to $575 million.

The network operator will pay a fee to amend the covenants, but won't face new borrowing margins or other fees.

Earlier this year Chorus announced plans to scale back re-investment in its ageing copper network, which faces regulated price cuts, while introducing new unregulated revenue streams and cutting costs, including probable job cuts. It also suspended payment of an interim dividend.

Last year the 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 appealing a High Court ruling upholding the way the regulator set a theoretical price for services on the copper lines, and has also requested that a more complete final pricing principle method is used to set the price. The regulator anticipates it will come up with a final price by April next year.

The share rose 0.6 percent to $1.665 yesterday, and have gained 16 percent this year, after being punished by investors last year over the regulatory risk.

(BusinessDesk)

© Scoop Media

 
 
 
 
 
Business Headlines | Sci-Tech Headlines

 

Media: Julian Wilcox Leaves Māori TV

Māori Television has confirmed the resignation of Head of News and Production Julian Wilcox. Mr Maxwell acknowledged Mr Wilcox’s significant contribution to Māori Television since joining the organisation in 2004. More>>

ALSO:

Genetics: New Heat Tolerant Cow Developed

Hamilton, New Zealand-based Dairy Solutionz Ltd has led an expert genetics team to develop a new dairy cow breed conditioned to thrive in lower elevation tropical climates and achieve high milk production under heat stress. More>>

Fractals: Thousands More Business Cards Needed To Build Giant Sponge

New Zealand is taking part in a global event this weekend to build a Menger Sponge using 15 million business cards but local organisers say they are thousands of business cards short. More>>

Scoop Business: NZ Net Migration Rises To Annual Record In September

New Zealand’s annual net migration rose to a record in September, beating government forecasts, as the inflow was spurred by student arrivals from India and Kiwis returning home from Australia. More>>

ALSO:

Scoop Business: Fletcher To Close Its Christchurch Insulation Plant, Cut 29 Jobs

Fletcher Building, New Zealand’s largest listed company, will close its Christchurch insulation factory, as it consolidates its Tasman Insulations operations in a “highly competitive market”. More>>

ALSO:

Scoop Business: Novartis Adds Nine New Treatments Under Pharmac Deal

Novartis New Zealand, the local unit of the global pharmaceuticals firm, has added nine new treatments in a far-ranging agreement with government drug buying agency, Pharmac. More>>

ALSO:

Crown Accounts: English Wary On Tax Take, Could Threaten Surplus

Finance Minister Bill English is warning the tax take may come in below forecast in the current financial year, as figures released today confirm it was short by nearly $1 billion in the year to June 30 and English warned of the potential impact of slumping receipts from agricultural exports. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

Standards New Zealand

Mosh Social Media
 
 
 
 
 
 
 
 
Business
Search Scoop  
 
 
Powered by Vodafone
NZ independent news