Rogers 2006 Annual Report Download - page 48

44 RO GER S COMM UNIC AT ION S IN C . 20 0 6 ANN UA L RE POR T
MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
amount that remained outstanding of RCI’s (via RTHI, formerly Call-
Net Enterprises Inc.) 10.625% Senior Secured Notes due 2008 which
was redeemed on January 3, 2006; and $25 million of mortgages and
leases. In addition, Wireless paid aggregate net cash settlements of
$20 million upon the maturities in June 2006 and December 2006 of
cross-currency interest rate exchange agreements in the aggregate
notional amount of U.S. $327 million and RCI received $74 million
from the issuance of Class B Non-Voting shares under the exercise of
employee stock options.
In July 2006, Cable and Telecom
entered into an amendment to
its bank credit facility to insert
provisions for the springing
release of security in a similar
fashion as provided in all of
Cable and Telecom’s public debt
indentures. This provision pro-
vides that if Cable and Telecom
has two investment grade rat-
ings on its debt and there is no
other debt or cross-currency
interest rate exchange agree-
ment secured by a bond issued
under the Cable and Telecom
deed of trust, then the security
provided for a particular debt
instrument will be discharged
upon 45 days prior notice by
Cable and Telecom. A similar amendment has been made in each
of Cable and Telecom’s cross-currency interest rate exchange
agreements.
Covenant Compliance
All of the Rogers companies are currently in compliance with all
of the covenants under their respective debt instruments, and we
expect to remain in compliance with all of these covenants. Based on
our most restrictive debt covenants at December 31, 2006, we could
have borrowed approximately $2.14 billion of additional secured
long-term debt under existing credit facilities, in addition to the
$160 million outstanding at December 31, 2006.
2007 Cash Requirements
We anticipate that Wireless will generate a net cash surplus in 2007
from cash generated from operations. We also expect Wireless to
make distributions to RCI in the form of intercompany advances or
distributions of capital. We expect that Wireless has sufficient capital
resources to satisfy its cash funding requirements in 2007, including
the funding of distributions to RCI, taking into account cash from
operations and the amount available under its $700 million bank
credit facility.
We expect that Cable and Telecom will generate a net cash shortfall
in 2007. In addition, Cable and Telecom’s $450 million 7.60% Senior
Secured Second Priority Notes matured in February 2007. We expect
that Cable and Telecom will have sufficient capital resources to sat-
isfy its cash funding requirements in 2007, taking into account cash
from operations, the amount available under its $1.0 billion bank
credit facility and intercompany advances from RCI.
We expect that Media will generate a net cash surplus in 2007 and
that Media has sufficient capital resources to satisfy its cash funding
requirements in 2007, taking into account cash from operations and
the amount available under its $600 million bank credit facility.
We believe that, on an unconsolidated basis, RCI will have, taking
into account interest income and repayments of intercompany
advances, together with the receipt of rental payments paid by the
operating subsidiaries and advances or distributions from Wireless
and investments from cash on hand, sufficient capital resources to
satisfy its cash funding requirements in 2007. Effective December 31,
2006, the payment of management fees by subsidiary companies
ceased. In addition, Cable and Telecom will no longer distribute
$6 million per month on a regular basis to RCI.
In the event that we or any of our operating subsidiaries do require
additional funding, we believe that any such funding requirements
would be satisfied by issuing additional debt financing, which may
include the restructuring of existing bank credit facilities or issuing
public or private debt at any of the operating subsidiaries or at
RCI or issuing equity of RCI, all depending on market conditions. In
addition, we or one of our subsidiaries may refinance a portion of
existing debt subject to market conditions and other factors. There is
no assurance that this will or can be done.
Required Principal Repayments
At December 31, 2006, the required repayments on all long-term debt
in the next five years totalled $2,459 million. The required repay-
ments in 2007 consist mainly of Cable and Telecom’s $450 million
7.60% Senior Secured Second Priority Notes which have since been
repaid at maturity in February 2007. The remaining required repay-
ments are in 2010 and 2011. The required repayments in 2010 consist
of Wireless’ $641 million (U.S. $550 million) Floating Rate Senior
Secured Notes together with $160 million outstanding under bank
credit facilities, all of which mature in 2010. The required principal
repayments in 2011 consist of Wireless’ $571 million (U.S. $490 million)
9.625% Senior Secured Notes and $460 million 7.625% Senior Secured
Notes and Cable and Telecom’s $175 million 7.25% Senior Secured
Second Priority Notes.
Credit Ratings
On March 6, 2007, Moody’s Investors Service upgraded the senior
secured debt ratings of Cable and Telecom and of Wireless to Baa3
(from Ba1), upgraded the senior subordinated debt rating of Wireless
to Ba1 (from Ba2) and changed the ratings outlook to stable (from
under review for possible upgrade). In addition, the corporate fam-
ily rating for RCI was withdrawn (previously Ba1), as this benchmark
rating for speculative grade companies is no longer applicable. On
January 9, 2007, Moody’s upgraded the corporate family rating of
RCI as well as the senior secured debt ratings of Cable and Telecom
and of Wireless to Ba1 (from Ba2) and upgraded the senior subor-
dinated debt rating of Wireless to Ba2 (from B1). In addition, the
ratings outlook was changed to under review for possible upgrade
(from positive outlook). On February 17, 2006, Moody’s increased the
ratings on all of the Rogers public debt. The corporate family rating
for RCI was increased to Ba2 (from Ba3) and the senior secured debt
ratings of Cable and Telecom and of Wireless were also increased
200620052004
2.7x3.9x5.3x
RATIO OF DEBT TO
OPERATING PROFIT*
($)
* Includes debt and derivatives at carr
y
in
g
value