With BCE’s financials in disarray, resulting in debt-rating downgrades from two different agencies, the company’s CEO had to find a new approach
BCE is getting $4.7-billion for its 37.5-per-cent share of MLSE, a conglomerate that owns the Toronto Maple Leafs and the Toronto Raptors, among other sports teams.
The financial woes that got him here mounted rather quickly. Only two years ago, BCE’s shares traded at a record high. However, central banks started raising interest rates in March, 2022, and the aggressive hikes put pressure on dividend stocks like BCE because their yields stopped looking as enticing relative to ultra-safe guaranteed investment certificates.
“It is a difficult environment, no question,” Mr. Bibic said at Bank of Montreal’s annual telecom conference last week. The rating agency also noted that BCE has consistently increased its debt relative to earnings before interest, taxes, depreciation and amortization since 2019, “and has not demonstrated any commitment to deleveraging while maintaining a dividend growth model.”
But the competitive landscape is so challenging that BCE can’t wait it out. Not only has the federal government continued to slash newcomer targets, rival telecom companies “BCE management has indicated its desire to reduce leverage by 2026 through noncore assets sales and other corporate initiatives; however, the timeliness and magnitude of these actions is uncertain,” the rating agency wrote in its report.
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