Telus 2011 Annual Report Download - page 75

TELUS 2011 ANNUAL REPORT . 71
MANAGEMENT’S DISCUSSION & ANALYSIS: 7
TELUS credit facilities
Outstanding Backstop
At December 31, 2011 undrawn letters for commercial Available
($ in millions) Expiry Size Drawn of credit paper program liquidity
Five-year revolving facility(1) November 3, 2016 2,000 – – (766) 1,234
Other bank facilities – 165 (4) (115) – 46
Total – 2,165 (4) (115) (766) 1,280
(1) Canadian dollars or U.S. dollar equivalent.
TELUS’ revolving credit facility contains 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, 2011) 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 10.1 to 1 at December 31, 2011) 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 – excluding
restructuring costs and EBITDA – excluding restructuring costs interest
coverage. Historically, the calculations have not been materially different.
The covenants are not impacted by revaluation of property, plant and
equipment, intangible assets or goodwill for accounting purposes.
Continued access to TELUS’ credit facilities is not contingent on the
maintenance by TELUS of a specific credit rating.
Subsequent to December 31, 2011, the Company received financing
commitments from two Canadian financial institutions in connection
with the TELUS Garden project. TELUS Corporation plans to participate
as a 50% lender in the construction credit facilities which, once fully
documented, will provide a combined total of $413 million of liquidity
to the real estate joint venture. The facilities contain customary repre-
sentations, warranties and covenants and are secured by demand
debentures constituting first fixed and floating charge mortgages over
the two under lying real estate projects. The facilities bear interest at
bankers’ acceptance rate or prime rate, plus applicable margins. As at
February 23, 2012, no amounts had been advanced under the facilities.
7.6 Sale of trade receivables
Effective August 1, 2011, TELUS Communications Inc. (TCI), a wholly
owned subsidiary of TELUS, amended 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. The
amendment resulted in the term of the revolving period securitization
agreement being extended to August 1, 2014. The agreement prior
to this amendment was set to expire in May 2012.
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 23, 2012.
7.7 Credit ratings
There were no changes to the Company’s investment grade credit ratings
during 2011, or as of February 23, 2012. TELUS believes its adherence
to its stated financial policies and the resulting investment grade credit
ratings, coupled with its efforts to maintain 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.)
7.5 Credit facilities
In 2011, TELUS Corporation entered into a new bank credit facility with
a syndi cate of 15 financial institutions. The new credit facility consists
of a $2 billion (or U.S. dollar equivalent) revolving credit facility expiring
November 3, 2016, to be used for general corporate purposes including
the backstop of commercial paper. This new facility replaced the
Company’s pre-existing $2 billion committed credit facility prior to its
expiry in May 2012. The new facility has no substantial changes in terms
and conditions other than pricing.
At December 31, 2011, TELUS had available liquidity of $1.28 billion
from unutilized credit facilities, as well as availability of $100 million under
its trade receivables securitization program (see Section 7.6), consistent
with the Company’s objective of generally maintaining at least $1 billion
of available liquidity.