Nov 26 – Standard & Poor’s Ratings Services today assigned its ‘BBB-‘
issue-level rating to Telephone and Data Systems Inc.’s (TDS) proposed
$200 million maximum senior unsecured notes due 2061.
The existing ratings on TDS, including the ‘BBB-‘ corporate credit rating and
negative rating outlook, remain unchanged.
As of Sept. 30, 2012, debt to EBITDA (adjusted for operating leases and post
retirement obligations) was 2.1x, which we expect to remain in the low-2x area
pro forma for the proposed debt issuance. Although leverage is slightly higher
than the typical 1.5x to 2x range that we normally associate with the
company’s “modest” financial risk profile, this is somewhat offset by the
company’s “strong” liquidity in our assessment. Due to significant secular and
competitive pressures on the wireline and wireless businesses, we do not
expect leverage to improve organically over the next 12 months. Opportunities
for permanent debt reduction include the repayment of the company’s 6.625%
senior notes due 2045 ($116.3 million outstanding as of Sept. 30, 2012), which
became callable at par in 2010. The negative rating outlook, which indicates a
one-third possibility of a downgrade over the next two years, continues to
focus on business fundamentals. The rating could be pressured if competition
at U.S. Cellular intensifies, leading to higher subscriber losses and
depressed EBITDA margins.
For the corporate credit rating rationale on Telephone and Data Systems, see
the summary analysis published on Sept. 21, 2012, on RatingsDirect.
RELATED CRITERIA AND RESEARCH
— Business Risk/Financial Risk Matrix Expanded, Sept. 18, 2012
— Liquidity Descriptors For Global Corporate Issuers, Sept. 28, 2011
— Use Of CreditWatch And Outlooks, Sept. 14, 2009
— Criteria Guidelines For Recovery Ratings, Aug. 10, 2009
— 2008 Corporate Criteria: Analytical Methodology, April 15, 2008
— 2008 Corporate Criteria: Rating Each Issue, April 15, 2008
— 2008 Corporate Criteria: Ratios And Adjustments, April 15, 2008
RATINGS LIST
Telephone and Data Systems Inc.
Corporate Credit Rating BBB-/Negative/–
New Rating
Telephone and Data Systems Inc.
Senior Unsecured Notes Due 2061 BBB-
