Q: The Globe reports that Moody's just downgraded BCE. I understand that the downgrade means borrowing costs are higher. What else does it mean?
Do you think that BCE will have need to borrow money in the next couple of years.
Thanks a lot for your views.
Do you think that BCE will have need to borrow money in the next couple of years.
Thanks a lot for your views.
5i Research Answer:
A downgrade in credit rating also tends to come with a few other things including:
_Increasing credit risk: The company’s financial position may deteriorate, which may affect investors’ appetite for BCE’s stock, especially conservative investors
_Credit terms: BCE may face stricter covenants in the future, making it harder to borrow money.
Debt is a critical part of BCE’s financing for growth projects. BCE tends to fund capital projects through a combination of internal cash flow and debt, the higher financing costs would certainly put a limit on the amount the company can borrow as well as the interest expense on BCE’s profitability.