BCE Inc. has announced:
that BCE will privatize Bell Aliant by acquiring the interest of its affiliate’s public minority shareholders, while supporting Bell Aliant’s ongoing growth and competitiveness with significant investments in Atlantic Canada infrastructure and employment.
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BCE expects the privatization transaction to be completed by November 30, 2014, subject to more than 50% of Bell Aliant common shares held by public minority shareholders being tendered to the offer, notification under the Competition Act, and other conditions set forth in the support agreement, a copy of which is available under Bell Aliant’s SEDAR profile at www.sedar.com. CRTC and Industry Canada approvals are not required because there is no change in control of Bell Aliant, and no transfers of wireless spectrum licences.
BCE will also offer holders of preferred shares of Bell Aliant Preferred Equity Inc. (Prefco) the opportunity to exchange their Prefco preferred shares for BCE preferred shares with the same financial terms as the existing Prefco preferred shares, subject to terms and conditions of the offer. Completion of the Bell Aliant privatization is not conditional upon completion of the preferred share exchange.
The Special Committee of the independent directors of Prefco has unanimously determined that the preferred share offer is fair to preferred shareholders and, on the Special Committee’s recommendation, the Board of Directors of Prefco is recommending that shareholders accept the offer and tender their preferred shares. The Special Committee has received an opinion from Scotia Capital that, subject to the assumptions, limitations and qualifications set out in such opinion, the consideration to be received pursuant to the BCE preferred shares offer is fair from a financial point of view to the preferred shareholders. Completion of the preferred share exchange offer is conditional upon completion of the common share offer, holders of at least two-thirds of the outstanding preferred shares tendering their preferred shares to the offer, and the other conditions set forth in the support agreement.
The offers are expected to be commenced in mid-August and to expire in the second half of September. Tender offer circulars containing the full details of the common share offer and the preferred share offer (together with directors’ circulars for each offer) and other related documents setting forth full details of the terms and conditions of the offers will be mailed to shareholders.
It is not clear to me just what the position of untendered BAF preferred shares will be, in terms of the corporate structure, but will await shareholder documents.
Affected issues are:
These issues will be nicely complementary to BCE.PR.K, A FixedReset, 4.15%+188, which commenced trading July 5, 2011 with a ridiculous re-opening 2011-12-12.
DBRS has confirmed BCE at Pfd-3(high):
Following the transaction, DBRS expects Bell Aliant to be transferred to Bell Canada from BCE. As such, DBRS expects Bell Canada’s 2014 year-end gross debt-to-EBITDA to be approximately 2.35 times (x) versus DBRS’s previous expectation of approximately 2.10x. In its rating report dated April 7, 2014, DBRS stated that it expects Bell Canada to reduce its gross debt-to-EBITDA ratio to below 2.0x by mid-2015 and that failure by the Company to deleverage as expected could result in a negative rating action. DBRS is now more comfortable with a gross debt-to-EBITDA ratio of slightly above 2.0x over the medium term given the benefits to the business risk profile of the combined entity, the Company’s strong coverage ratios and its solid operating performance.
Going forward, the Company intends to deleverage through growth in operating income and the application of free cash flow toward debt reduction toward 2.0x over the next two to three years. This could be accelerated with the use of a dividend reinvestment plan funded by treasury stock issuance. Weaker-than-expected operating performance and/or failure to deleverage in the expected time frame could result in pressure on the ratings.
DBRS expects the transaction to be completed in November 2014. DBRS notes that the CRTC and Industry Canada approvals are not required because there is no change in control of Bell Aliant and no transfers of wireless spectrum licenses. DBRS will re-evaluate its ratings confirmation if there is an increase in BCE’s offer price and/or a change in the terms of financing.
DBRS has placed BAF Under Review with Positive Implications:
DBRS has today placed the ratings of Bell Aliant Regional Communications, Limited Partnership’s (Bell Aliant) Under Review with Positive Implications following BCE Inc.’s tender offer to acquire the minority interest in Bell Aliant for $3.95 billion (BCE Inc./Bell Canada currently own 44.1% of Bell Aliant).
As part of the transaction, BCE Inc. will assume Bell Aliant’s $2.89 billion net debt and $618 million preferred shares. The Positive Implications of the Under Review status reflect the stronger credit profile of BCE Inc./Bell Canada. DBRS will proceed with its review as more information about the form and final structure of the transaction becomes available.
Similarly, S&P’s rating of BCE is unaffected at P-2(low):
Standard & Poor’s Ratings Services today said that its ratings and outlook on Montreal-based diversified telecom and media service provider BCE Inc. (BBB+/Stable/–) and its related entities are not affected by the company’s tender offer to acquire the remaining (55.9%) minority interest float in Bell Aliant Inc. for approximately C$3.95 billion. BCE plans to fund the transaction with about C$2.95 billion of BCE Inc. common shares and about C$1 billion of debt.
And S&P’s rating of BAF is on CreditWatch Positive:
- •Montreal-based BCE Inc. has announced a tender offer to acquire the remaining minority interest float in Atlantic-Canada based Bell Aliant Inc.
- •BCE will fund the C$3.95 billion purchase with about C$2.95 billion of
equity and about C$1 billion of debt.
- •As a result, we are placing our long-term ratings on Bell Aliant and its related entities, including our ‘BBB’ corporate credit rating on the company, on CreditWatch with positive implications.
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We expect to rate any Bell Aliant debt that remains after the acquisition on a consolidated basis with BCE — the ratings on which are unchanged following this announcement …. The transaction is subject to support from more than 50% of Bell Aliant’s minority shareholders as well as approval from the Competition Bureau of Canada, and we expect it to close in fourth-quarter 2014 following these approvals.
Update, 2014-8-15: DBRS has assigned a provisional rating of Pfd-3(high) to the proposed new preferreds:
DBRS has today assigned a provisional rating of Pfd-3 (high) to BCE Inc.’s (BCE) proposed Series AM, Series AO and Series AQ Preferred Share Issuance. As part of BCE’s tender offer to acquire the minority interest in Bell Aliant Inc., BCE has offered to exchange all of the issued and outstanding Series A Preferred Shares, Series C Preferred Shares and Series E Preferred Shares at Bell Aliant Preferred Equity Inc. (Bell Aliant) on the basis of (a) one BCE Series AM Preferred Share for each Series A Preferred Share, (b) one BCE Series AO Preferred Share for each Series C Preferred Share and (c) one BCE Series AQ Preferred Share for each Series E Preferred Share. The assignment of final ratings is subject to the completion of the preferred share exchange as indicated above.
The following ratings are based on BCE’s Take Over Bid Circular and Offer and information provided to DBRS as of August 14, 2014.
— Series AM Preferred Shares rated Pfd-3 (high), Stable trend
— Series AO Preferred Shares rated Pfd-3 (high), Stable trend
— Series AQ Preferred Shares rated Pfd-3 (high), Stable trend
BCE expects to issue 11,500,000 Offeror Series AM Preferred Shares, 4,600,000 Offeror Series AO Preferred Shares and 9,200,000 Offeror Series AQ Preferred Shares, assuming that all of the Bell Aliant Preferred Shares are acquired upon completion of the offer and any compulsory acquisition or subsequent acquisition transaction.
The newly issued BCE Preferred Shares will have the same financial terms (including, without limitation, the dividend rate) as Bell Aliant’s existing Preferred Shares. These newly issued BCE Preferred Shares will rank equally with other BCE First Preferred Shares that may be outstanding in the event of an insolvency or winding up of BCE. If BCE becomes insolvent or is wound up, BCE’s assets must be used to pay debt, including inter-company debt, before payments may be made on BCE Preferred Shares, BCE Converted Preferred Shares and other preferred shares. Please refer to BCE’s Take Over Bid Circular and Offer for further details.
