Following the announcement that BCE is in talks with privatizers, DBRS has announced that they:
today placed the ratings of BCE, A (low)/R-1 (low)/R-2 (high)/Pfd-2 (low), and its wholly owned subsidiary, Bell Canada, “A”/R-1 (low)/BBB (high), (collectively, BCE or the Company) Under Review with Negative Implications following the Company’s announcement today that it is reviewing strategic alternatives with a view to maximize shareholder value….Given the Company’s current operating structure, DBRS notes that any transaction that takes leverage above 4.0 times debt to EBITDA could cause its ratings to decline below the investment-grade threshold of BBB (low).
No word from S&P yet. I’ll keep you posted.
BCE has the following preferred shares outstanding: BCE.PR.A, BCE.PR.C, BCE.PR.E, BCE.PR.F, BCE.PR.G, BCE.PR.H, BCE.PR.I, BCE.PR.R, BCE.PR.S, BCE.PR.T, BCE.PR.Y & BCE.PR.Z
Update: S&P has joined the fun:
Standard & Poor’s Ratings Services today said it placed its ratings, including its ‘A-‘ long-term corporate credit rating, on Montreal, Que.-based telecommunications provider BCE Inc. and its wholly owned subsidiary, Bell Canada (collectively, BCE), on CreditWatch with negative implications, following the announcement that it had entered into discussions with a group of leading Canadian pension funds to explore the potential privatization of the company.
…
Should the leveraged buyout of BCE be successful, we expect debt leverage and corresponding credit metrics will materially weaken from our current expectations; adjusted debt leverage will significantly increase from our expectations of 2.6x at year-end 2007, which could lead to a multinotch downgrade, possibly to speculative-grade.
In the event a privatization is not consummated, we believe the company will be faced with increasing shareholder pressures for some form of leveraging transaction over the near term, which could also lead to lowering the ratings, given that BCE/Bell Canada has modest debt capacity under the current ratings.
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