Moody's downgrades Verizon

Moody's Investors Service said it downgraded Verizon Communications, Inc.'s issuer rating and senior debt rating to Baa1 from A3, Cellco Partnership's issuer rating and senior debt rating to A3 from A2, Verizon Wireless Capital LLC's senior debt rating to A3 from A2, GTE Corp.'s senior debt rating to Baa2 from Baa1 and Verizon Global Funding Corp. senior debt rating to Baa1 from A3. The outlook is stable.

The downgrade is a result of Verizon's decision to buy out Vodafone Group plc's 45% ownership in Cellco Partnership (d/b/a Verizon Wireless) for about $130 billion.

The agency said the downgrade reflects the increase in leverage resulting from the addition of about $67 billion of new debt, which will more than double Verizon's debt load to $116 billion (GAAP). In addition, the roughly 1.3 billion shares of new common stock that the company will have to issue will have a large impact on its ability to generate free cash flow (and deleverage) since it increases Verizon's annual common stock dividend by about 50% to about $9 billion, Moody's noted.

Verizon's Baa1 long-term debt rating reflects its significant scale of operations, the diversity of its revenue mix and a strong market position across all business segments, particularly wireless, the agency said.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.