Verizon gets leverage to targeted range at 2x; credit metrics rally

By Devika Patel

Knoxville, Tenn., July 24 – Verizon Communications Inc. has returned its credit metric levels to 2014 levels, despite the current economic crisis, and the company’s balance sheet is in good shape with debt decreasing by $4.9 billion last quarter, leaving leverage within Verizon’s targeted range.

“Despite the pandemic, our balance sheet was further strengthened in the quarter,” executive vice president and chief financial officer Matthew D. Ellis said on the company’s second quarter ended June 30 earnings conference call on Friday.

“We continue to operate with elevated liquidity levels, which we believe is appropriate in this environment.

“During the quarter, we further lowered maturities through year-end 2022 by $3.8 billion with liability management transactions, which also improved overall portfolio borrowing costs.

“We now have no unsecured bond maturities for the remainder of this year and less than $1 billion in 2021,” Ellis said.

Verizon's total unsecured debt decreased by $4.9 billion during the quarter to $102.2 billion at the end of the second quarter, and its net unsecured debt decreased by $5.7 billion to $94.4 billion, resulting in a net unsecured debt to adjusted EBITDA ratio of about 2x at the end of the second quarter, down slightly from its leverage ratio of 2.1x at the end of the first quarter.

“Though we are at the high end of our targeted range of 1.75x to 2x, we continue to manage our balance sheet under our capital allocation policy,” Ellis said.

“Our estimates of the leverage ratio Standard and Poor’s uses for their credit rating analysis is now less than their boundary for an A- rating.

“Therefore, we have now met our commitment to return to our pre-Vodafone credit rating profile,” Ellis said.

Verizon bought out Vodafone Group plc’s 45% interest in the company for approximately $130 billion in February 2014.

The company’s management is pleased with the balance sheet and last quarter’s cash flows.

“Our financial team has continued to do good work on our balance sheet,” chairman and chief executive officer Hans Vestberg said on the call.

“We have come out of the quarter with elevated liquidity but not only that we have continued to work well on our net debt and we have reached credit metric levels similar to pre-Vodafone levels, so that’s really good work.

“We had a very good quarter; we showed resilience.

“[We had] very strong cash flows.

“In general, it was a strong cash flow quarter,” Vestberg said.

Cash and cash equivalents were $7,882,000,000 as of June 30, 2020, compared to $2,594,000,000 as of Dec. 31, 2019.

Long-term debt was $106.19 billion as of June 30, 2020, compared to $100,712,000,000 as of Dec. 31, 2019.

Debt maturing in one year was $6,651,000,000 as of June 30, 2020, compared to $10,777,000,000 as of Dec. 31, 2019.

Verizon is a New York-based telecommunications company.

© 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.