DBRS Assigns Pfd-3 (high) Rating to Bell Aliant Preferred Equity Inc.’s $100 Million Preferred Shares Issuance

DBRS has today assigned a rating of Pfd-3 (high), with a Stable trend, to Bell Aliant Preferred Equity Inc.’s preferred share issuance totalling $100 million (the Preferred Shares), with an over-allotment of up to $15 million. The Preferred Shares are cumulative five-year rate reset preferred shares with an initial dividend rate of 4.55%.

This share issuance was initiated by Bell Aliant Preferred Equity Inc. today for settlement on or around December 7, 2011.

The Preferred Shares will be fully and unconditionally guaranteed by Bell Aliant Regional Communications Inc. (Bell Aliant GP), the general partner and guarantor of Bell Aliant Regional Communications, Limited Partnership (Bell Aliant LP; rated BBB (high)/R-1 (low) by DBRS) and its debt obligations. While normally this type of corporate structure would raise the issue of structural subordination relative to Bell Aliant LP, DBRS believes that provisions undertaken between the various entities – as part of inter-company loans and guarantees – mitigate this concern while appropriately ranking the preferred shares behind the senior indebtedness of Bell Aliant LP and Bell Aliant GP. Bell Aliant GP has no external debt outstanding.

DBRS expects Bell Aliant Preferred Equity Inc. to indirectly lend the proceeds to Bell Aliant LP. With the proceeds, Bell Aliant LP intends to make a lump-sum voluntary payment to certain pension plans and use the remainder for general corporate purposes.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating the Communications Industry, which can be found on our website under Methodologies.