Rogers 2008 Annual Report Download - page 56

52 ROGERS COMMUNICATIONS INC. 2008 ANNUAL REPORT
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Additional Revolving Credit Facility
In order to ensure that we had sufficient liquidity after taking into
account the payment for the wireless spectrum auction, in July
2008, RCI entered into a credit agreement with Canadian finan-
cial institutions for an unsecured revolving credit facility of up to
$500 million available until maturity 364 days following the closing
date. No funds were drawn under this credit facility and RCI terminated
the credit facility in August 2008 subsequent to the closing of our
US$1.75 billion public debt issue.
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 2009. At December 31, 2008, there are
no financial leverage covenants in effect other than those pursu-
ant to our bank credit facility (see Note 14(c)(i) to the 2008 Audited
Consolidated Financial Statements). Based on our most restrictive
leverage covenants, we could have incurred $14.7 billion of addi-
tional long-term debt at December 31, 2008, including the $1.8 billion
undrawn portion of our existing $2.4 billion bank credit facility.
2009 Cash Requirements
On a consolidated basis, we anticipate that we will generate a net
cash surplus in 2009 from cash generated from operations. We
expect that we will have sufficient capital resources to satisfy our
cash funding requirements in 2009, 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, 2008, 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 additional funding, we believe that any
such funding requirements may 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 addition, we may refinance a
portion of existing debt subject to market conditions and other fac-
tors. There is no assurance that this will or can be done.
Required Principal Repayments
At December 31, 2008, the required repayments on all long-term
debt in the next five years totals $3,744 million, comprised of
$1 million of capital leases due in 2009, $1,235 million principal repay-
ments due in 2011, $1,494 million principal repayments due in 2012
and $1,014 million due in 2013. The required principal repayments
due in 2011 consist of $600 million (US$490 million) 9.625% Senior
Notes and $460 million 7.625% Senior Notes and $175 million 7.25%
Senior Notes. The required principal repayments due in 2012 consist of
$575 million (US$470 million) 7.25% Senior Notes, $490 million
(US$400 million) 8.00% Subordinated Notes and $429 million
(US$350 million) 7.875% Senior Notes. The required repayment due
in 2013 is the $429 million (US$350 million) 6.25% Senior Notes, as
well as the maturity of the bank credit facility.
Credit Ratings Upgrades
In June 2008, Fitch Ratings upgraded each of the following: the
issuer default rating for RCI to BBB (from BBB-); the rating for RCI’s
senior unsecured debt to BBB (from BBB-); and the rating for RCI’s
senior subordinated debt to BBB- (from BB+). All of these ratings
have a stable outlook (from positive prior to this upgrade). In July
2008, Fitch assigned its BBB rating to each of the 2018 Notes and the
2038 Notes.
In June 2008, Moody’s Investors Service revised RCI’s ratings out-
look to positive (from stable) while affirming its Baa3 rating on
RCI’s senior unsecured debt and Ba1 on RCI’s senior subordinated
debt. In July 2008, Moody’s assigned its Baa3 rating to each of the
2018 Notes and the 2038 Notes and affirmed each of the ratings and
positive outlook noted above.
In June 2008, Standard & Poor’s Ratings Services revised RCI’s ratings
outlook to positive (from stable) while affirming its BBB- corporate
credit rating, BBB- rating on RCI’s senior unsecured debt and BB+
on RCI’s senior subordinated debt. In July 2008 Standard & Poor’s
assigned its BBB- rating to each of the 2018 Notes and the 2038
Notes and affirmed each of the ratings noted above.
Credit ratings are intended to provide investors with an indepen-
dent 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 high-
est 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 credit
ratings accorded by the rating
agencies are not recommenda-
tions to purchase, hold or sell
the rated securities inasmuch as
such ratings do not comment as
to market price or suitability for
a particular investor. There is no
assurance that any rating will
remain in effect for any given
period of time, or that any rating
will not be revised or withdrawn
entirely by a rating agency in the
future if in its judgment circum-
stances so warrant. 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.
Deficiency of Pension Plan Assets Over Accrued Obligations
As disclosed in Note 17 to our 2008 Audited Consolidated Financial
Statements, our pension plans had a deficiency of plan assets over
accrued obligations of $66 million and $83 million at December 31,
2008, and December 31, 2007, respectively, related to funded plans,
and a deficiency of $27 million and $24 million at December 31, 2008
and December 31, 2007, respectively, related to unfunded plans.
Our pension plans had a deficiency on a solvency basis at December
31, 2007, and is anticipated to have a deficiency on a solvency basis
at December 31, 2008. Consequently, in addition to our regular
contributions, we are making certain minimum monthly special
payments to eliminate the solvency deficiency. In 2008, the special
payment totalled approximately $19 million. Our total estimated
annual funding requirements, which include both our regular con-
tributions and these special payments, are expected to increase from
$38 million in 2008 to $64 million in 2009, subject to annual adjust-
ments thereafter, due to various market factors and the assumption
that staffing levels at the Company will remain relatively stable year-
20082007
7.1x6.4x4.7x
RATIO OF ADJUSTED
OPERATING PROFIT
TO INTEREST
200
7
200
8
2006