Global Credit Research - 06 Mar 2014
New York, March 06, 2014 --
Moody's Investors Service ("Moody's") has assigned A3 ratings to AT&T Inc.'s ("AT&T") new $2.5 billion note offering which consists of $1.1 billion 2.3% Global Notes due 2019, $1 billion 3.9% Global Notes due 2024 and $400 million floating rate global notes due 2019. The proceeds will be used for general corporate purposes, including the funding of pending spectrum and wireless acquisitions.
RATINGS RATIONALE
AT&T's underlying A3 senior unsecured rating reflects its scale and its resilient and well-diversified operating cash flow. The rating is also supported by AT&T's dominant position as the #1 or #2 operator in nearly all of the key segments in which it competes. Growth has been dampened in recent years due to maturing markets, the disruptive effect of evolving technology and macroeconomic weakness. Yet, AT&T has maintained the willingness and ability to invest in an asset base which has solidified its market position and which most rivals cannot match.
AT&T's high dividend continues to pressure its capital structure and consume almost all of its residual cash flow after capex. We expect free cash flow after dividends to remain weak in 2014 and 2015 as capital investment is flat and cash taxes rise. This weakness may attract equity market scrutiny on the dividend payout ratio and Moody's believes this may drive management to issue debt to support the stock price - either to fund M&A or aggressive share repurchase. However, the current A3 rating will not accommodate incremental leverage, especially given the aforementioned weak near term cash flow metrics.
AI
Market Data 
Markets 
