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Fitch rates Verizon notes A-
Fitch Ratings said it assigned an A- rating to Verizon Communications Inc.'s proposed senior unsecured notes due 2054.
The company has an issuer default rating of A-.
The outlook is stable.
The proceeds will be used for general corporate purposes.
Verizon's proposed $130 billion acquisition of Vodafone Group, plc's 45% interest in Cellco Partnership is expected to close in February 2014, Fitch said.
Shareholders of both companies have approved the transaction. The transaction remains subject to the approval of authorities and other closing conditions, the agency said.
The acquisition pressures Verizon's near-term credit metrics, pushing pro forma leverage at closing to about 2.7x, Fitch said.
To finance the remainder of the transaction, Verizon will draw on a $12 billion term loan, the agency added.
Subsequent to the close of the acquisition, Fitch said it expects Verizon to materially reduce debt over the next few years. EBITDA growth, combined with debt reductions, are expected to reduce leverage to about 2x by the end of 2016, which Fitch said it believes is appropriate for an A- rating.
Fitch added that it recognizes leverage will be outside an appropriate range for an A- rating for several years. However, the agency said it has a high level of confidence that metrics will return to a level appropriate for the rating due to the company's strong position in the wireless industry and the significant cash flows generated by the wireless business.
Also, the agency said it is confident in management's commitment to de-lever as it has proved in the by the aggressive de-levering following the acquisition of Alltel Corp. in early 2009.
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