MetroPCS Communication Inc. (PCS)’s proposed combination with Deutsche Telekom AG (DTE)’s T-Mobile USA unit is the best outcome for the company and will improve credit quality, according to KDP Investment Advisors Inc.
The new T-Mobile company will be a standalone entity and is expected to receive “significant support” from owner Deutsche Telekom, Scott Dinsdale, an analyst at Montpelier, Vermont-based KDP, wrote in a report today.
The new company will take on Deutsche Telekom’s intercompany debt, which will be rolled into a $15 billion 8.5- year unsecured note to its owner, according to the report.
Holders of MetroPCS debt will have a stronger parent company to back their bonds, Dinsdale wrote. “This scale, and cash flow generating ability, along with our implied support from the parent, leads to a significant improvement in credit quality and probably a likely exit from the high yield market.”
MetroPCS’s $1 billion of 6.625 percent bonds due November 2020 declined 0.8 cent to 108.3 cents on the dollar to yield 5.36 percent as of 3:48 p.m. in New York, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority. The notes earlier reached 111.6 cents.
The securities closed at 105.6 cents on the dollar Oct. 1, the day before Bloomberg News first reported discussions between the companies.
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