AT&T announced a $5.5 billion loan deal with 12 banks, telling investors in a business update that it has “a strong cash position, including a strong balance sheet and attractive liquidity” amid the economic disruption caused by the coronavirus pandemic.
On March 20, AT&T canceled a $4 billion stock buyback it had planned for the second quarter and halted all share repurchases, seeking to preserve cash. The telco, which owns WarnerMedia and DirecTV, also warned that the fallout from COVID-19 “could be material” to its financial results.
The new $5.5 billion term-loan agreement, with Bank of America acting as lead agent, will “provide additional financial flexibility to an already strong cash position,” AT&T said, adding that the loans are pre-payable without penalty.
“The strength and relevance of our core subscription businesses, our continued execution on our business transformation initiatives, and sizing our 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,” AT&T said Tuesday.
AT&T said it will provide more information on how the COVID-19 crisis is affecting the business on its first-quarter 2020 earnings call, scheduled for April 22 before market open. The telco also announced that because of the coronavirus pandemic, it hold its 2020 annual meeting of stockholders via webcast on April 24 rather than an in-person meeting.
In the update to investors, the telco noted that it had about $12 billion in cash on hand as of Dec. 31, 2019. The company also has the ability to tap into a “fully committed” $15 billion revolving credit facility but added that it “has no need or plans to use it in 2020.”
Before the COVID-19 crisis hit, AT&T had embarked on a strategy to sell off assets to pay down debt it amassed through the Time Warner deal. Last fall, it announced a deal to sell its majority stake in Central European Media Enterprises (CME), and on Tuesday said it expects to record about $2 billion when the CME deal closes later in 2020. AT&T said it expects to generate additional cash from “a number of other real estate and tower monetizations,” including the sale of its Puerto Rico and U.S. Virgin Islands operations later this year.
Regarding its supply chain, AT&T said, “While the COVID-19 pandemic is subject to rapid change, in general, the company believes its exposure to near-term equipment shortages is limited.”
Amid the global economic crisis, AT&T expects to continue to pay a quarterly dividend to shareholders, with the next dividend payable May 1. Meanwhile, the company said its pension trust has no cash funding requirements through 2022 and that the pension plan’s assets are “invested conservatively” with equities comprising 29% of the portfolio as of the end of 2019.
(Pictured above: AT&T chairman and CEO Randall Stephenson)