(Bloomberg) — Rogers Communications Inc. sold C$2 billion ($1.4 billion) of hybrid securities, a funding strategy that blends characteristics of debt and equity and may help the company preserve its credit quality.
The Canadian cable and wireless services provider priced the notes to yield 5%, at the low end of a range proposed to investors on Tuesday, according to people with knowledge of the matter. The offering, with a 60-year maturity and a call option after five years, received orders equivalent to 2.75 times the size of the deal from 83 investors, the people said.
The sale, Rogers first time in the fixed income market in more than 18 months, is one of the most widely distributed deals in the Canadian dollar bond market this year. 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.
Rogers’ new hybrids are rated BBB minus, the lowest investment grade, and also are on Credit Watch with negative implications, S&P said in an statement Wednesday.
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.
(Updates with terms of the sale in second paragraph)
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