Rogers Issues Hybrids After Raising Yield Amid Market Volatility

(Bloomberg) -- Rogers Communications Inc. raised the yield on a new issue of dollar-denominated hybrid securities, a type of subordinated debt that carries more risk of default, as markets were rattled by stock and bond selloffs.

Toronto-based Rogers priced $750 million of 60-year notes with a call option after five-years at a yield of 5.25% up from initial price talk of about 5.125%, according to people familiar with the matter. S&P Global Ratings assigned its lowest investment grade to the securities, BBB-, and said it has the rating on watch for a potential downgrade to junk-bond status.

The yield boost suggests that bankers were seeking to lure more buyers as stocks tumbled Thursday after disappointing results from Facebook-owner Meta Platforms Inc. and the U.S. Treasury market was hit by a renewed round of selling on concern about rising interest rates worldwide.

The proposed sale comes after the company paid higher-than-expected prices for 5G licenses soon after agreeing to a multi-billion dollar acquisition of a rival. Proceeds from the junior notes sale will be used to refinance senior debt maturing this year and short-term borrowing associated with last year's government wireless-airwave auction, according to S&P.

The company's bid to squeeze C$1 billion ($789 million) in synergies from its planned merger with Shaw Communications Inc. by mid-2025 is “critical” to the firm's effort to keep its investment grade rating, the ratings company said. Rogers is currently rated BBB+ and is likely to be downgraded by two notches, S&P said in a Jan. 19 note.

Businesses issue hybrid bonds to beef up their balance sheets because rating companies treat them partly as equity. Investors in such bonds effectively take on the second-most risk after stockholders because the securities are subordinate to more senior layers of debt in priority for payment.

The sale will mark Rogers' first in the U.S. dollar-bond market since June 2020 and come after it sold C$2 billion of the same kind of securities in December.

Rogers spent about C$3.3 billion in the latest government auction of wireless airwaves, more than triple the base-case forecast of S&P. The ratings company has had Rogers on review for a potential downgrade since March, when Rogers unveiled its planned C$26 billion purchase of

Shaw.

A representative for Rogers declined to comment.