Rogers 2008 Annual Report Download - page 55

ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT 51
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
the US$350 million aggregate principal amount of 2038 Notes from a
fixed coupon rate of 7.50% into Cdn$359 million at a weighted aver-
age fixed interest rate of 7.53%. The Cross-Currency Swaps hedging
the 2018 Notes have been designated as hedges against the desig-
nated U.S. dollar-denominated debt for accounting purposes, while
the Cross-Currency Swaps hedging the 2038 Notes have not been
designated as hedges for accounting purposes.
Also effective on August 6, 2008, RCI re-couponed three of the exist-
ing Cross-Currency Swaps by terminating the original Cross-Currency
Swaps aggregating US$575 million notional principal amount and,
simultaneously, entering into three new Cross-Currency Swaps
aggregating US$575 million notional principal amount at then cur-
rent market rates. In each case, only the fixed foreign exchange rate
and the Canadian dollar fixed interest rate were changed and all
other terms for the new Cross-Currency Swaps are identical to the
respective terminated Cross-Currency Swaps they are replacing. The
termination of the three original Cross-Currency Swaps resulted in
RCI paying US$360 million (Cdn$375 million) for the aggregate out-
of-the-money fair value for the terminated Cross-Currency Swaps
on the date of termination, thereby reducing by an equal amount,
the fair value of the derivative instruments liability on that date.
The three new Cross-Currency Swaps have the effect of converting
US$575 million aggregate notional principal amount of U.S. dol-
lar-denominated debt from a weighted average U.S. dollar fixed
interest rate of 7.20% into Cdn$589 million ($1.025 exchange rate)
at a weighted average Canadian dollar fixed interest rate of 6.88%.
In comparison, the original Cross-Currency Swaps had the effect of
converting US$575 million aggregate notional principal amount of
U.S. dollar-denominated debt from a weighted average U.S. dollar
fixed interest rate of 7.20% into Cdn$815 million ($1.4177 exchange
rate) at a weighted average Canadian dollar fixed interest rate of
7.89%. Each of the three new Cross-Currency Swaps has been desig-
nated as a hedge against the designated U.S. dollar-denominated
debt for accounting purposes.
On December 15, 2008, two of our Cross-Currency Swaps matured
on their scheduled maturity date and, as a result, we received
US$400 million and paid $475 million aggregate notional principal
amounts on the settlement at maturity. Also on December 15, 2008,
we settled a forward foreign exchange contract to sell an aggre-
gate US$400 million in exchange for $476 million. As a result of the
maturity of these Cross-Currency
Swaps, our US$400 million 8.00%
Senior Subordinated Notes due
2012 are no longer hedged.
In addition, during 2008, an
aggregate $655 million net
repayment was made under
our bank credit facility. As of
December 31, 2008, we had an
aggregate $585 million of bank
debt drawn under our $2.4 bil-
lion bank credit facility that
matures in July 2013, leaving
approximately $1.8 billion avail-
able to be drawn. This liquidity
position is also enhanced by the
fact that our earliest scheduled
debt maturity is in May 2011.
Shelf Prospectuses
In order to maintain financial
flexibility, in November 2007
RCI filed shelf prospec tuses
with securities regulators to
qualify debt securities of RCI
for sale in Canada and/or in the
United States. In August 2008,
US$1.75 billion aggregate prin-
cipal amount of debt securities
was issued in the United States
pursuant to the U.S. dollar shelf
prospectus. In October 2008, an
amendment was filed to permit
additional securities to be issued
in the United States pursuant to
the U.S. dollar shelf prospectus
so that the limit available for
securities to be issued in Canada
and the United States pursuant to the shelf prospectuses was essen-
tially restored to the range of the original shelf prospectus filings.
The notice set forth in this paragraph does not constitute an offer
of any securities for sale.
Normal Course Issuer Bid
In January 2008, RCI filed a normal course issuer bid (“NCIB”) which
authorizes us to repurchase up to the lesser of 15,000,000 of our
Class B Non-Voting shares and that number of Class B Non-Voting
shares that can be purchased under the NCIB for an aggregate pur-
chase price of $300 million for a period of one year. On May 21, 2008,
RCI repurchased for cancellation 1,000,000 of its outstanding Class
B Non-Voting shares pursuant to a private agreement between RCI
and an arm’s length third party seller for an aggregate purchase
price of $39.9 million and, on August 1, 2008, RCI repurchased for
cancellation 3,000,000 of its outstanding Class B Non-Voting shares
pursuant to a private agreement between RCI and an arm’s-length
third party seller for an aggregate purchase price of $93.9 million.
Each of these purchases was made under an issuer bid exemption
order issued by the Ontario Securities Commission and will be
included in calculating the number of Class B Non-Voting shares
that RCI may purchase pursuant to the NCIB. In addition, in August
and September 2008, RCI purchased an aggregate 77,400 of its
outstanding Class B Non-Voting shares directly under the NCIB for
an aggregate purchase price of $2.9 million. The NCIB expired on
January 13, 2009. On February 18, 2009, RCI announced that it had
filed a notice of intention to renew its prior NCIB for a further one-
year period commencing February 20, 2009 and ending February
19, 2010. The number of Class B Non-Voting shares to be purchased
under the renewed NCIB, if any, and the timing of such purchases
will be determined by RCI considering market conditions, stock
prices, its cash position, and other factors.
Wireless Spectrum Auction Letters of Credit and Payment for
Auctioned Spectrum
In order to participate in the auction of wireless spectrum licences
which commenced May 27, 2008, we arranged for the issuance of
standby letters of credit aggregating $534 million pursuant to the terms
and conditions of the auction. These letters of credit were cancelled on
September 3, 2008 upon payment in full for the spectrum licences in the
recent auction. See the section entitled “Spectrum Auction Conclusion”
in the Wireless segment review for further discussion.
20082007
2.1x2.1x2.7x
RATIO OF DEBT TO
ADJUSTED OPERATING PROFIT*
200
7
2008
2006
* Includes debt and estimated risk-free fair value of
Cross-Currency Swaps.
20082007
$3,307$2,825$2,449
CONSOLIDATED CASH FLOW
FROM OPERATIONS
(In millions of dollars)
2007
2008
2006