Rogers 2007 Annual Report Download - page 50

46 ROGERS COMMUNICATIONS INC. 2007 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Normal Course Issuer Bid
In January 2008, RCI applied to the Toronto Stock Exchange (“TSX”)
to make an NCIB, which was accepted by the TSX on January 10, 2008,
for purchases of its Class B Non-Voting shares through the facilities
of the TSX. The maximum number of Class B Non-Voting shares that
may be purchased pursuant to the NCIB is the lesser of 15 million,
representing approximately 3% of the number of Class B Non-
Voting shares outstanding at December 31, 2007, and that number
of Class B Non-Voting shares that can be purchased under the NCIB
for an aggregate purchase price of $300 million. The actual number
of Class B Non-Voting shares purchased, if any, and the timing of
such purchases, will be determined by RCI considering market con-
ditions, stock prices, its cash position, and other factors.
Covenant Compliance
We are currently in compliance with all of the covenants under our
debt instruments, and we expect to remain in compliance with all
of these covenants during 2008. At December 31, 2007, there are
no financial leverage covenants in effect other than those pursu-
ant to our bank credit facility (see Note 15(i) to the 2007 Audited
Consolidated Financial Statements). Based on our most restric-
tive leverage covenants, we could have incurred $14.6 billion
of additional long-term debt at December 31, 2007, including
the $1.16 billion undrawn portion of our existing $2.4 billion bank
credit facility.
2008 Cash Requirements
On a consolidated basis, we anticipate that we will generate a net
cash surplus in 2008 from cash generated from operations. We
expect that we will have sufficient capital resources to satisfy our
cash funding requirements in 2008, including the funding of divi-
dends on our Class A Voting and Class B Non-Voting shares, taking
into account cash from operations and the amount available under
our $2.4 billion bank credit facility. At December 31, 2007, there
were no restrictions on the flow of funds between subsidiary com-
panies nor between RCI and any
of its subsidiaries.
In the event that we require addi-
tional funding, we believe that
any such funding requirements
would be satisfied by issuing
additional debt financing, which
may include the restructuring of
our existing bank credit facility
or issuing public or private debt
or issuing equity, all depending
on market conditions. In addi-
tion, we may refinance a portion
of existing debt subject to mar-
ket conditions and other factors.
There is no assurance that this
will or can be done.
Required Principal Repayments
At December 31, 2007, the required repayments on all long-term debt
in the next five years totals $2,326 million, comprised of $1 million
of capital leases due in 2008, $1,119 million principal repayments
due in 2011 and $1,206 million principal repayments due in 2012. The
required principal repayments due in 2011 consist of $484 million
(US$490 million) 9.625% Senior Notes, $460 million 7.625% Senior
Notes and $175 million 7.25% Senior Notes. The required principal
repayments due in 2012 consist of $464 million (US$470 million) 7.25%
Senior Notes, $395 million (US$400 million) 8.00% Subordinated
Notes and $346 million (US$350 million) 7.875% Senior Notes.
Credit Ratings
In February 2007, Fitch Ratings increased the issuer default ratings
for RCI, Wireless and Cable to BBB- (from BB) and increased the
senior debt ratings for Wireless and Cable to BBB- (from BB+), while
the senior subordinated debt rating for Wireless was affirmed at
BB. In May 2007, Fitch affirmed these ratings, revised the ratings
outlook to positive from stable and indicated that when the RCI
amalgamation was completed on July 1, 2007, the issuer default rat-
ings for Wireless and Cable would be withdrawn and the rating on
the Senior Subordinated Notes of Wireless would be upgraded to
BB+ (from BB). In July 2007, Fitch confirmed that it had withdrawn
the issuer default ratings for Wireless and Cable and upgraded the
rating on RCI’s Senior Subordinated Notes to BB+ (from BB).
In March 2007, Moody’s Investors Service upgraded the senior debt
ratings for Wireless and Cable to Baa3 (from Ba1) and upgraded the
senior subordinated debt rating of Wireless to Ba1 (from Ba2). In
May 2007, Moody’s announced that, pending routine due diligence
to confirm that the RCI amalgamation and release of security was
implemented as intended, there would be no ratings impact and
the current Baa3 ratings would continue to prevail.
In April 2007, Standard & Poor’s Ratings Services raised its long-
term corporate credit ratings for RCI, Wireless and Cable to
BBB- (from BB+), raised the senior debt ratings for Wireless and
Cable to BBB- (from BB+) and raised the senior subordinated debt
rating for Wireless to BB+ (from BB-). In May 2007, Standard &
Poor’s announced that its ratings were unaffected following the
Company’s decision to amalgamate RCI with Wireless and Cable to
release the security on its outstanding debt.
In summary, RCI’s unsecured senior public debt is rated investment
grade by each of Fitch, Moody’s and Standard & Poor’s.
Credit ratings are intended to provide investors with an independent
measure of credit quality of an issue of securities. Ratings for debt
instruments range from AAA, in the case of Standard & Poor’s and
Fitch, or Aaa in the case of Moody’s, which represent the highest
quality of securities rated, to D, in the case of Standard & Poor’s,
C, in the case of Moody’s and Substantial Risk in the case of Fitch,
which represent the lowest quality of securities rated. The ratings
on RCI’s senior debt of BBB- from Standard & Poor’s and Fitch and
of Baa3 from Moody’s represent the minimum investment grade
ratings.
20072006
$3,135$2,386$1,551
CONSOLIDATED CASH FLOW
FROM OPERATIONS
(In millions of dollars)
2006
2007
2005