Rogers 2009 Annual Report Download - page 43

ROGERS COMMUNICATIONS INC. 2009 ANNUAL REPORT 47
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
In 2009, we purchased an aggregate 43,776,20 0 Class B
Non-Voting shares for an aggregate purchase price of $1,347 million.
An aggregate 1,051,000 of these shares comprising $34 million of
the aggregate purchase price were purchased and recorded in
December 2009 but were settled in early January 2010. In addition,
10,280,000 of the shares were purchased by RCI pursuant to private
agreements between RCI and certain arm’s-length third party
sellers for an aggregate purchase price of $285 million. Each of these
purchases was made under an issuer bid exemption order issued
by the Ontario Securities Commission and is included in calculating
the number of Class B Non-Voting shares that RCI may purchase
pursuant to the NCIB. The NCIB expires on February 19, 2010.
On February 17, 2010, we announced that the Toronto Stock
Exchange has accepted a notice filed by RCI of our intention
to renew our NCIB for a further one-year period commencing
February 22, 2010 and ending February 21, 2011, and which during
such one-year period we may purchase on the TSX up to the lesser
of 43.6 million Class B Non-Voting shares and that number of Class
B Non-Voting shares that can be purchased under the NCIB for an
aggregate purchase price of $1.5 billion. The actual number of Class
B Non-Voting shares purchased under the NCIB and the timing
of such purchases will be determined by RCI considering market
conditions, 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 2010. At December 31, 2009, there are no
financial leverage covenants in effect other than those pursuant
to our bank credit facility (see Note 14(b) to the 2009 Audited
Consolidated Financial Statements). Based on our most restrictive
leverage covenants, we would have had the capacity to issue up
to approximately $16.8 billion of additional long-term debt at
December 31, 2009, including the full amount of our existing $2.4
billion bank credit facility, excluding letters of credit of $47 million.
2010 Cash Requirements
On a consolidated basis, we anticipate that we will generate a
net cash surplus in 2010 from cash generated from operations.
We expect that we will have sufficient capital resources to satisfy
our cash funding requirements in 2010, including the funding of
dividends on our common shares, taking into account cash from
operations and the amount available under our $2.4 billion bank
credit facility. At December 31, 2009, there were no restrictions on
the flow of funds between subsidiary companies 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
factors. There is no assurance that this will or can be done.
Required Principal Repayments
At December 31, 2009, the required repayments on all long-term debt
in the next five years totals $3,537 million, comprised of $1 million
of capital leases due in 2010, $1,150 million principal repayments
due in 2011, $862 million principal repayments due in 2012,
$368 million due in 2013 and $1,156 million due in 2014. The required
principal repayments due in 2011 consist of $515 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 $494 million (US$470 million) 7.25% Senior
Notes and $368 million (US$350 million) 7.875% Senior Notes. The
required principal repayment due in 2013 is the $368 million (US$350
million) 6.25% Senior Notes, as well as the maturity of the bank credit
facility, which at December 31, 2009 is undrawn. The required
principal repayments due in 2014 consist of $368 million (US$350
million) 5.50% Senior Notes and $788 million (US$750 million)
6.375% Senior Notes.
Coincident with the maturity of our U.S. dollar-denominated long
term debt, certain of our Derivatives also mature.
Credit Ratings Upgrades
In May 2009, Moody’s Investors Service upgraded the rating for RCI’s
senior unsecured debt to Baa2 (from Baa3) and upgraded the rating
for RCI’s senior subordinated debt (redeemed in December 2009) to
Baa3 (from Ba1), each with a Stable outlook (from Positive). Also in
May 2009, Moody’s assigned its Baa2 rating to the 2016 Notes and
in October 2009 Moody’s assigned its Baa2 rating to the 2019 Notes
and to the 2039 Notes.
In May 2009, Standard & Poor’s Ratings Services upgraded each
of the following: the long term corporate credit 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. Also
in May 2009, Standard & Poor’s assigned its BBB rating to the 2016
Notes and in October 2009 Moody’s assigned its BBB rating to the
2019 Notes and to the 2039 Notes and affirmed each of the ratings
noted above.
In May 2009, Fitch Ratings affirmed each of the following: the issuer
default rating for RCI at BBB; the rating for RCI’s senior unsecured
debt at BBB; and the rating for RCI’s senior subordinated debt at
BBB-, each with a Stable outlook. Also in May 2009, Fitch assigned
its BBB rating to the 2016 Notes and in October 2009 Fitch assigned
its BBB rating to the 2019 Notes and to the 2039 Notes.
Credit ratings are intended
to provide investors with an
independent measure of credit
quality of an issue of securities.
Ratings for debt instruments
range along a scale 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 credit ratings
accorded by the rating agencies
are not recommendations to
purchase, hold or sell the rated
20092008
2007
2008
2007
2009
6.8x7.1x6.4x
RATIO OF ADJUSTED
OPERATING PROFIT TO INTEREST