(Bloomberg) — Rogers Communications Inc. started taking orders for its debut sale of hybrid securities, a funding strategy that blends characteristics of debt and equity and may help the company preserve its credit quality.
The Toronto-based telecommunications services provider plans to issue between C$1.5 billion ($1.19 billion) and C$2 billion of such notes, according to people with knowledge of with the matter. The proposed security would have a 60-year maturity, a call option after five years and will be priced to yield 5%, according to people familiar with the matter.
A representative for Rogers didn’t provide immediate comment.
Rogers spent about C$3.3 billion in the latest government auction of wireless airwaves, more than triple the base-case forecast of S&P Global Ratings. The ratings company has had Rogers on review for a potential downgrade since March, when Rogers unveiled a planned C$26 billion, debt-funded purchase of Shaw Communications Inc.
In a note on Sept. 22, S&P analyst Aniki Saha-Yannopoulos said that Rogers’ “management is exploring various funding options, which could include hybrids, and sale of non-core asset sales to fund the investment” in Shaw, adding that a hybrid offering would help Rogers keep its debt leverage ratios below a certain threshold. Rogers has a rating of BBB+, S&P’s third-lowest investment grade.
Companies issue hybrid bonds to beef up their balance sheet as rating companies treat them partly as equity. Generally speaking, investors in hybrids take on the second-most risk after stockholders, because the securities are subordinate to more senior layers of debt in priority for payment.
Rogers last sold bonds in the Canadian dollar market in March 2020, when it raised C$1.5 billion by issuing debt due 2027, Bloomberg data show. The notes are quoted at a spread of around 142 basis points over government securities compared to 139 basis points Tuesday, according to Bloomberg bid prices.
More stories like this are available on bloomberg.com
©2021 Bloomberg L.P.
