negatives
Moody’s recently released a note regarding its position on AT&T’s current state of affairs. The following is a list of the negatives Moody’s identified for the company.
Weak financial metrics
Anemic growth
Broad vulnerability to disruption.
Balance sheet size
Free cash flow after dividends limited
Susceptible to competitive pressure, technological disruption and macroeconomic trends
The Ugly
The enormous debt load
AT&T's big bet on Time Warner needs to pay off. Moody's put the company on review for a downgrade in October after the company announced its $85-billion deal for Time Warner. Moody's has given a Baa1 rating to the new notes, but says it's keeping the company ratings on review for downgrade.
AT&T is issuing six tranches of five-year, seven-year, 10-year, 20-year, 30-year and 40-year maturities. These issues are not directly related to financing the Time Warner deal but likely earmarked for general purposes and rollovers. Moody's believes AT&T needs to reduce leverage back toward a target of 3 times. If the company can’t reduce the leverage ratio in due time, things could get ugly really fast. What’s more, the stock market is still trading just a hair off its all-time highs while uncertainty remains at exceptionally elevated levels.
Markets and uncertainty at all-time highs