Telus 2010 Annual Report Download - page 73

TELUS 2010 annual report . 69
MANAGEMENT’S DISCUSSION & ANALYSIS: 7
7.5 Credit facilities
At December 31, 2010, TELUS had available liquidity exceeding $1.8 bil-
lion from unutilized credit facilities, as well as availability of $100 million
under its accounts receivable securitization program (see Section 7.6),
consistent with the Company’s objective of generally maintaining at least
$1 billion of available liquidity.
TELUS’ revolving credit facilities contain customary covenants,
including a requirement that TELUS not permit its consolidated Leverage
Ratio (debt to trailing 12-month EBITDA) to exceed 4 to 1 (approximately
1.8 to 1 at December 31, 2010) and not permit its consolidated Coverage
Ratio (EBITDA to interest expense on a trailing 12-month basis) to be
less than 2 to 1 (approximately 7.3 to 1 at December 31, 2010) at the
end of any financial quarter. There are certain minor differences in
the calculation of the Leverage Ratio and Coverage Ratio under the credit
agreements as compared with the calculation of Net debt to EBITDA
and EBITDA interest coverage. Historically, the calculations have not
been materially different. The covenants are not impacted by revaluation
of property, plant and equipment, intangible assets and goodwill for
accounting purposes. See Business policy assessment in Section 8.2.5
for discussion of the covenants after TELUS’ changeover to IFRS on
January 1, 2011. Continued access to TELUS’ credit facilities is not con-
tingent on the maintenance by TELUS of a specific credit rating.
TELUS credit facilities
Outstanding Backstop
At December 31, 2010 undrawn letters for commercial Available
($ millions) Expiry Size Drawn of credit paper program liquidity
Five-year revolving facility(1) May 1, 2012 2,000 – (117) (104) 1,779
Other bank facilities – 61 (2) (3) – 56
To t a l – 2,061 (2) (120) (104) 1,835
(1) Canadian dollars or U.S. dollar equivalent.
7.6 Accounts receivable sale
TELUS Communications Inc. (TCI), a wholly owned subsidiary of
TELUS, is a party to an agreement with an arm’s-length securitization
trust associated with a major Schedule I Canadian bank, under
which TCI is able to sell an interest in certain of its trade receivables,
for an amount up to a maximum of $500 million. As a result of
selling the interest in certain of the trade receivables on a fully
serviced basis, a servicing liability is recognized on the date of sale
and is, in turn, amortized to earnings over the expected life of the
trade receivables.
TCI is required to maintain at least a BBB (low) credit rating
by DBRS Ltd. or the securitization trust may require the sale program
to be wound down. The necessary credit rating was exceeded as
of February 24, 2011.
Balance of proceeds from securitized receivables
Dec. 31 Sept. 30 June 30 Mar. 31 Dec. 31 Sept. 30 June 30 Mar. 31
($ millions) 2010 2010 2010 2010 2009 2009 2009 2009
400 400 400 400 500 400 400 300
7.7 Credit ratings
TELUS believes its adherence to its stated financial policies and the
resulting investment grade credit ratings, coupled with its efforts to main-
tain a constructive relationship with banks, investors and credit rating
agencies, continue to provide reasonable access to capital markets.
(See Section 10.6 Financing and debt requirements.)