Chorus credit rating on notice for upgrade on copper decision, Moody's says

Thursday 17th December 2015

Chorus's credit profile will get a closer look by global ratings agency Moody's Investors Service with a view to raising it after the market deemed it a winner from the Commerce Commission's final decision setting the network operator's regulated prices on its copper wires.

Moody's placed the Wellington-based company's Baa3 rating on review for an upgrade on the "better than expected" outcome for the company over regulated prices. The commission ultimately decided to let Chorus raise its prices for access to the copper network, leading to the company raising its earnings guidance. Moody's expects the decision will reduce the company's debt to earnings before interest, tax, depreciation and amortisation to 3.7 times in the 2016 financial year, below the 4 times threshold for an upgrade.

"The outcome of the rating review will also take into account Chorus's capital management update, planned for February 2016," Moody's senior analyst Ian Chitterer said in a statement. "The review will focus on the impact of the NZCC's announcement on Chorus's financial profile, and factor in the implications for currently suspended dividend payments and cost-saving initiatives that Chorus put in place following the initial benchmarking decision."

Chorus had its rating cut by Moody's last year when it appeared the regulator would impose steeper price cuts on the copper network. The company had to renegotiate its funding with Crown Fibre Holdings after the government wasn't able to convince its partners that a legislative response was needed to protect the build of a nationwide fibre network.

The shares soared to a record on the regulator's decision, and have since drifted lower, falling 1.6 percent to $3.69 today.

BusinessDesk.co.nz

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