Rogers Communications Ltd. struck the largest sole-sourced bridge loan in Canadian history this week, landing a $19-billion commitment from New York-based BofA Securities to pay for its planned takeover of rival Shaw Communications Inc.
Rogers chief executive officer Joe Natale said the loan is “a sign of faith the financial community has in Rogers.”
The country’s second-largest telecom company won’t actually receive the money unless the Shaw deal closes as planned next year.
Bankers say the massive Rogers financing signals lenders are willing to put up significant amounts of capital to back acquisitions. BofA made its commitment to Rogers on the heels of Alimentation Couche-Tard Inc. , owner of Circle K convenience stores, lining up a similar-sized debt package for a potential US$20-billion takeover of French grocer Carrefour SA , a deal that was blocked by the French government.
Rogers’s bridge loan will be syndicated, or farmed out, to numerous other banks by early next week. Rogers expects to initially pay between 4-per-cent and 5-per-cent interest on the loan, according to banking sources and bond market traders. The Globe and Mail is not naming these sources because they are not authorized to speak for Rogers and the terms of the financing are not finalized. BofA Securities, the investment dealer arm of Bank of America Corp. , declined to comment.
Rogers needed to line up a bridge loan prior to its bid for Shaw because Canadian securities regulations require takeovers be fully funded when they are announced.
If the Shaw deal closes, Rogers would draw on the bridge loan, then plans to move quickly to pay down a portion of the debt and refinance the remainder by issuing bonds and other long-term financing. In all, the banks would stand to earn tens of millions of dollars in merger-and-acquisition and financing fees on the transaction. On Tuesday, Rogers’s long-term Canadian and U.S. dollar-denominated bonds were yielding around 3.7 per cent, and bond traders said the bridge loan will likely have similar interest rates.
Rogers is borrowing and would take on an additional $5.8-billion of Shaw’s debt if its takeover is successful at a time when interest rates are near record lows and credit markets are wide open. Canadian governments and companies borrowed a record $269.7-billion in 2020, according to Refinitiv, much more than the previous single-year record of $184.9-billion.
Some business owners might fret over borrowing this much money. However, at Rogers, this kind of leverage is considered conservative.
Rogers and credit rating agencies said the telecom company will remain an investment-grade credit even after a debt-funded Shaw purchase. Rogers’s long-term debt is currently rated triple-B-plus by Standard & Poor’s. That’s a contrast to the years of junk bond ratings at the Toronto-based company when founder Ted Rogers was building the business through acquisitions.
In the 1960s, Mr. Rogers famously broke a promise to his wife’s family by mortgaging the home they bought for the newlywed couple, in Toronto’s upscale Forest Hill neighbourhood, to launch his business.
In the 1980s, Rogers was one of the the first cable companies to tap the U.S. junk bond market, after Canadian banks balked at further loans to the company. Initially, the company hired Michael Milken’s firm Drexel Burnham Lambert to raise US$181-million, money Rogers used to buy Canadian and U.S. cable franchises.
As a junk bond borrower in 1983, Rogers paid up to 14.25-per-cent rates to borrow for five years. However, none of the interest payments were due until the debt matured, giving the company time to integrate cable operations and crank up cash flow. After a Shaw takeover, Rogers expects to generate $1-billion annually in synergies from combining the companies and lower its debt from five times annual earnings before interest, taxes, depreciation and amortization to three times EBITDA within two years.
In 2004, Rogers staged the largest junk bond offering in Canadian history, raising US$2.7-billion. The investment banker behind that financing was Robert Gemmell, who ran Citibank in Canada and also helped finance Rogers while working at Merrill Lynch, now part of BofA Securities. After retiring, Mr. Gemmell joined the Rogers board of directors.
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Barrick Gold profit beats expectations as copper, gold prices surge
JOHANNESBURG (Reuters) -Barrick Gold Corp reported a 78% jump in first-quarter profit on Wednesday, beating analyst expectations thanks to rising gold and copper prices, and said it was on track to meet annual forecasts.
Production in the second half is expected to be higher than the first, the gold miner said, thanks in part to the ramp-up of underground mining at the Bulyanhulu mine in Tanzania and higher expected grades at Lumwana in Zambia.
Barrick’s first-quarter gold production fell to 1.10 million from 1.25 million ounces due partly to lower grades at its Pueblo Viejo mine in Dominican Republic.
Adjusted profit surged 78% to $507 million in the quarter ended March 31, from $285 million a year earlier, and Barrick announced a 9 cent per share quarterly dividend.
Stronger prices helped boost Barrick’s revenue from its copper mines in Chile, Saudi Arabia and Zambia by 31% from the fourth quarter. Overall earnings per share were $0.29, ahead of analysts’ estimate of $0.27.
“We expect a positive stock reaction to the earnings beat and strong cash flow,” said Credit Suisse analysts.
POTENTIAL FOR SOUTH AFRICA MERGER
Barrick CEO Mark Bristow, who has championed mergers across the gold industry, said he backed the idea of South Africa-listed miners Goldfields and AngloGold Ashanti combining.
Speculation has been swirling around the two companies and Sibanye-Stillwater, whose CEO Neal Froneman floated the idea of a three-way merger in March.
“I’m a South African, and this country has such a great mining history and it would be great to see a real gold business come out of the many failed discussions that we’ve seen,” said Bristow.
Goldfields declined to comment. In a statement, AngloGold Ashanti said it was focused on delivering on its growth plan to unlock value from its portfolio of gold assets.
Bristow also said he had met with the Democratic Republic of Congo’s new mines minister and other officials and was continuing to work on getting $900 million belonging to its Kibali mine joint venture out of the country.
“We have a solution, it just needs to be sanctioned by the appropriate authorities which haven’t been around for a while,” he said, referring to a recent government overhaul by President Felix Tshisekedi.
(Reporting by Helen Reid in Johannesburg and Arundhati Sarkar in Bengaluru; editing by Shounak Dasgupta and Bernadette Baum)
Loblaw gets quarterly sales, profit boost from online demand surge
Retailer Loblaw Cos Ltd beat market estimates for quarterly revenue and profit on Wednesday, as its online sales more than doubled on soaring demand from homebound buyers for groceries and other essentials during the COVID-19 pandemic.
Lockdowns and other virus-related restrictions in Canada, including reduced store capacity, during the first three months of the year pushed consumers to stockpile groceries and other essential items.
Loblaw, one of the biggest retailers in Canada, said that the momentum from the first quarter has continued into the current quarter, adding that it expects to exceed its own full-year profit expectations.
However, the company has warned that its food retail unit, which saw a surge last year at the peak of stockpiling, would not be as robust in the current quarter. In the first month of the ongoing quarter, food same-store sales have declined slightly, Loblaw said.
For the second quarter, the company expects to incur pandemic-related costs of about $65 million to $75 million, compared with $282 million a year earlier.
Net earnings available to its common shareholders rose to C$313 million, or 90 Canadian cents per share, in the quarter ended March 27 from C$240 million, or 66 Canadian cents per share, a year earlier.
Excluding one-time items, the retailer earned C$1.13 per share, beating the average analysts’ estimate of 87 Canadian cents per share.
Its revenue rose to C$11.87 billion ($9.67 billion) in the first quarter from C$11.80 billion a year earlier, surpassing analysts’ estimate of C$11.72 billion, according to IBES data from Refinitiv.
($1 = 1.2277 Canadian dollars)
(Reporting by Mehr Bedi in Bengaluru; editing by Uttaresh.V)
Bombardier in talks to amend bondholders’ agreement after breach claim on asset sales
(Reuters) – Bombardier on Monday contested a bondholder’s claims that its recent sales of non-core assets breach the terms of certain notes, and said it would seek bondholders’ consent to amend terms on eight bond issues.
Bombardier has emerged as a pure play business jet maker after divesting assets including the sale of its transportation business to Alstom, which it completed in January, to pay down debt and boost earnings.
The company said it launched consent solicitations with respect to outstanding senior notes or debentures, following the claims by the unnamed bondholder that the asset sales constitute a breach of certain covenants under the indenture governing the 2034 notes.
Bombardier said in a statement these claims are without merit and it has not breached any covenant, adding that after evaluating various options it had determined requesting bondholders to amend the terms of the bonds was the most “expedient and efficient path” to maintain value and protect itself and its stakeholders.
If the amendments are approved, Bombardier will make a consent payment of $1.25 per $1,000 principal amount for applicable series of notes, and C$1.25 per C$1,000 principal of Canadian dollar-denominated 7.35% debentures due 2026, the statement said.
Bombardier also flagged early first-quarter revenue that would beat analysts’ estimates, as rising vaccinations encourage wealthy travelers to return to flying.
Bombardier reports earnings on Thursday.
The jet maker said it expects first-quarter adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) from continuing operations of $123 million, above analysts’ average estimate of $89 million, according to IBES data from Refinitiv.
The company expects business jet revenue to rise by 18% to $1.3 billion in the first quarter, from a year ago, beating Wall Street’s estimate of $1.18 billion.
Bombardier stock closed up 3.3%.
While deliveries are roughly the same, Bombardier’s product composition is shifting toward its flagship Global 7500 jets, a revenue driver.
Bombardier said it remains on track to deliver between 110-120 business aircraft in 2021. The company’s full-year deliveries fell 20% to 114 jets in 2020.
(Reporting by Ankit Ajmera in Bengaluru and Allison Lampert in Montreal; Editing by Shailesh Kuber and Karishma Singh)
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