DBRS New Issue - BellSouth Corporation
DBRS has assigned a rating of A (high)p to BellSouth Corporation’s (“BellSouth” or the “Company”) recent $3 billion notes issue that was done in two tranches including: (1) $1.5 billion, 4.20% notes that mature in September 2009; and (2) $1.5 billion, 5.20% notes that mature in September 2014.
The rating remains “Under Review With Negative Implications” given: (1) the pending transaction by Cingular Wireless LLC (“Cingular”) (wholly owned by SBC Communications Inc. and BellSouth) to acquire AT&T Wireless Services Inc. (“AT&T Wireless”) for $41 billion in cash; and (2) the increased business risk for incumbent telcos in the U.S. as a result of competition. The Cingular transaction is expected to close later in 2004.
The proceeds from this issue are to be used by BellSouth to help to fund its portion of Cingular’s acquisition of AT&T Wireless, which is estimated to be $16 billion. With this issue, DBRS expects the remaining portion of debt financing that BellSouth requires is now around $2 billion to $3 billion given: (1) its cash balance of $6 billion at June 30, 2004; (2) AT&T Wireless’ cash balance; and (3) the pending sale of its Latin American wireless operations for $3.2 billion.