Rogers Communications Inc. is raising $2-billion in credit markets to pay for recently acquired wireless spectrum and shore up its balance sheet ahead of its planned acquisition of Shaw Communications Inc.
Rogers sold subordinated notes that come due in 60 years and pay 5-per-cent interest. The offering is the largest hybrid securities financing ever done in Canadian markets, and Rogers doubled the size from $1-billion in the face of strong investor demand, according to investment banking sources. The Globe and Mail agreed not to name these sources because they are not authorized to speak for the company.
The transaction is scheduled to close on Dec. 17, and the Toronto-based telecom and media company said it plans to use the money to help pay for wireless spectrum it acquired in July for $3.3-billion and to repay other outstanding debt.
The financing came three weeks after Rogers named former chief financial officer Tony Staffieri as its interim chief executive officer, after a month-long boardroom battle. When he took the top job from former CEO Joe Natale in mid-November, Mr. Staffieri told analysts and investors his priorities included strengthening the company’s balance sheet.
Rogers’s new notes are known as hybrid securities because they have characteristics of debt and equity, which gives the company favourable treatment in the eyes of credit-rating agencies. In a news release late Wednesday, credit-rating agency Moody’s said the $2-billion offering will automatically be converted into Rogers preferred shares “upon occurrence of certain events, including bankruptcy,” which means the securities will rank behind the company’s other debt.
Sources said the investment dealer arms of Royal Bank of Canada and Bank of Nova Scotia led the underwriting of the record-high offering. The previous high water mark for hybrid securities was a $500-million financing from utility TC Energy Corp. earlier this year.
Rogers is currently seeking regulatory approval for its proposed $26-billion takeover of Calgary-based Shaw, which is expected to close next summer, and the company has consistently said it intends to maintain an investment grade credit rating after it buys Shaw.
Moody’s said Rogers has the option of selling more hybrid securities, which were only offered to Canadian investors to start. Rogers plans to issue at least $2-billion worth of additional hybrid securities and preferred shares to investors in the new year, with Mr. Staffieri targeting U.S. markets for the new offerings, according to sources.
The notes offering was announced late Wednesday, and sold as a private placement. In a news release, Rogers said the company will receive $1.98-billion after paying $20-million in fees to its bankers and lawyers.
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