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

 

Sky City : Auckland Convention Centre Cost Jumps By A Fifth

SkyCity Entertainment Group, the casino and hotel operator, is in talks with the government on how to fund the increased cost of as much as $130 million to build an international convention centre in downtown Auckland, with further gambling concessions ruled out. The Auckland-based company has increased its estimate to build the centre to between $470 million and $530 million as the construction boom across the country drives up building costs and design changes add to the bill.
More>>

ALSO:

RMTU: Mediation Between Lyttelton Port And Union Fails

The Rail and Maritime Union (RMTU) has opted to continue its overtime ban indefinitely after mediation with the Lyttelton Port of Christchurch (LPC) failed to progress collective bargaining. More>>

Earlier:

Science Policy: Callaghan, NSC Funding Knocked In Submissions

Callaghan Innovation, which was last year allocated a budget of $566 million over four years to dish out research and development grants, and the National Science Challenges attracted criticism in submissions on the government’s draft national statement of science investment, with science funding largely seen as too fragmented. More>>

ALSO:

Scoop Business: Spark, Voda And Telstra To Lay New Trans-Tasman Cable

Spark New Zealand and Vodafone, New Zealand’s two dominant telecommunications providers, in partnership with Australian provider Telstra, will spend US$70 million building a trans-Tasman submarine cable to bolster broadband traffic between the neighbouring countries and the rest of the world. More>>

ALSO:

More:

Statistics: Current Account Deficit Widens

New Zealand's annual current account deficit was $6.1 billion (2.6 percent of GDP) for the year ended September 2014. This compares with a deficit of $5.8 billion (2.5 percent of GDP) for the year ended June 2014. More>>

ALSO:

Still In The Red: NZ Govt Shunts Out Surplus To 2016

The New Zealand government has pushed out its targeted return to surplus for a year as falling dairy prices and a low inflation environment has kept a lid on its rising tax take, but is still dangling a possible tax cut in 2017, the next election year and promising to try and achieve the surplus pledge on which it campaigned for election in September. More>>

ALSO:

Job Insecurity: Time For Jobs That Count In The Meat Industry

“Meat Workers face it all”, says Graham Cooke, Meat Workers Union National Secretary. “Seasonal work, dangerous jobs, casual and zero hours contracts, and increasing pressure on workers to join non-union individual agreements. More>>

ALSO:

Get More From Scoop

 
 
Standards New Zealand

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