S&P rates Bell Aliant preferreds BB+

Standard & Poor's said it assigned P-3 (high) Canada scale and BB+ global scale preferred shares ratings to Bell Aliant Inc.'s C$250 million of series A cumulative rate reset preferred shares.

The outlook is stable.

The company intends to use the proceeds to fund a voluntary C$200 million contribution to Bell Aliant's pension plans and for general corporate purposes, including the repayment of debt under Bell Aliant's commercial paper program and to finance its fiber-to-the-home and other investments.

The BBB corporate credit rating and preferred shares ratings reflect the company's satisfactory business risk profile, supported by its solid market position as the incumbent telecommunications service provider in Atlantic Canada as well as in several rural markets of Ontario and Quebec; its ability to sustain relatively strong operating margins despite increased competition; and meaningful cash flow generation from a base of 3.8 million customer service connections, S&P said.

The rating also considers rising competition from cable operators offering triple-play services, product breadth too weak to profitably offset erosion of legacy revenue given the lack of facilities-based wireless, limited deployment of Internet protocol television services to date and somewhat weak credit protection measures, the agency said.

The debt-to-EBITDA ratio was about 2.8 times for the 12 months ended Dec. 31.

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