WarnerMedia parent A&T said Tuesday that it’s set up a new $5.5 billion loan agreement at competitive rates with 12 banks to provide additional financial flexibility to its “already strong cash position.” The loans are pre-payable without penalty, it said, as it seeks to reassure the markets and employees it’s on solid ground in uncertain times.
The company said it will provide more information on COVID-19 impacts to its financial and operational results on its first-quarter earnings call April 22. It will be the first big media company to report results and hopefully offer some clarity into the current quarter. Companies have been tumbling over each other in recent week to withdraw financial guidance offered in February before the dramatic impact of the virus was apparent.
AT&T also noted that it has access to a fully committed $15 billion revolver loan already in place that it has no need or plans to draw on in 2020 — but it’s there in case.
AT&T is the latest big media company to flesh out its cash cushion to hedge against the economic risks and unknowns of the coronavirus pandemic. Disney, Comcast, ViacomCBS and Fox between them have recently raised close to $14 billion by selling debt securities. Some companies like Discovery and AMC Entertainment have tapped their revolving credit lines. Others like AMC Networks have reassured investors that they have a revolver if needed – in AMC Network’s case, access to $500 million as yet uptapped.
In a statement, AT&T today also offered a financial update, ticking off its points of financial strength including a strong balance sheet and attractive liquidity. It said it had about $12 billion in cash on hand as of December 31 and received about $4 billion from selling preferred stock in February. It also completed a share repurchase in March but has now stopped all share repurchases.
Going forward, the company, which plans to roll out HBO Max next month, said it expects the following to put it in a good place:
• The strength and relevance of core subscription businesses, continued execution on business transformation initiatives, and sizing operations to economic activity will provide cash from operations that will support network investments, dividend payments and debt retirement, as well as the ability to invest in business opportunities that arise as the economies recover.
• About $2 billion from the expected closing later in 2020 from the previously announced divestiture of CME, as well as additional proceeds from a number of other real estate and tower sales.
• The company expects to close the sale of its Puerto Rico and U.S. Virgin Islands operations later this year and intends to use the proceeds to retire an outstanding preferred interest.
• Continued access to commercial paper, bond markets and other financing activities which, as in the past, will be utilized as part of normal financing activity based on cost, duration and overall market conditions.
• As it has for the past 36 years, the company will pay a quarterly dividend to shareholders. .
AT&T added that its pension fund requires no cash in the near term and it doesn’t expect any required contributions through 2022. The plan has allocated substantially all of the remaining assets to fixed income, preferred securities and other investments which have returns much less impacted by current equity markets.
It also emphasized that it believes its exposure to near-term equipment shortages is limited given a geographically diverse supply chain.
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