TORONTO – Moody’s Investors Service said this week that BCE Inc’s successor company, BCE Almalco, could receive a corporate family rating in the B2 to Ba3 range based on an analysis of information that has been publicly disclosed so far.
Ratings though on individual debt instruments could be as low as Caa1 and as high as Baa3, noted Moody’s in a statement.
“It is clear that the rating signal from financial metrics will deteriorate dramatically,” said Moody’s vice-president and senior credit officer Bill Wolfe. “Our pro forma estimates suggest financial metrics could fall into the B/Caa range.”
Moody’s emphasizes that the preliminary rating ranges reflect only information on the BCE private equity acquisition that has so far been publicly disclosed and assume no major changes to either BCE’s business or asset profiles.
Moody’s placed the debt ratings for BCE Inc. and its wholly-owned subsidiary, Bell Canada, under review for downgrade on April 17, 2007, after BCE announced that its board had entered into discussions with a group of investors on the possible acquisition of the company.
On September 21, 2007, BCE shareholders approved a $52 billion transaction that would transfer ownership to a private equity consortium.
Bell Canada and BCE currently have senior unsecured ratings of Baa1 and Baa2 respectively, and have approximately $10 billion in rated debt instruments outstanding.
The transaction is expected to increase book debt by more than 300%, transforming the company’s risk profile, according to Moody’s.
“However, assuming the new owners do not dramatically alter BCE’s business and asset portfolio, the transaction will not change the company’s fundamental nature, and it will remain what it is: a large, diversified, integrated telecommunications provider operating in the Canadian context of a relatively favorable environment characterized by generally protective regulation and limited competition,” noted Wolfe.
