AT&T stock rose more than 5% in early trading Tuesday after the telco said it had entered into a new $5.5 billion loan agreement with a dozen banks, at the same time assuring investors that it has more than sufficient liquidity to get through the current COVID-19 scare.
AT&T is just the latest in a series of companies that have tapped the debt markets for cash as the coronavirus forces Americans to stay at home. Several companies have already tapped the bond markets for cash -- including The Walt Disney Co. and Comcast -- while others have drawn on existing lines of credit -- like Discovery Inc. -- to ensure they will have sufficient cash to run their businesses as COVID-19 strains the ad business and other sectors.
The loan comes as some analysts had worried whether AT&T would be able to make its stock dividend commitments. AT&T said on March 27 that its board declared a dividend to be payable to shareholders of record as of April 9, payable on May 1. AT&T also reassured investors that the status of its pension fund is essentially the same as it was last year and that there are no funding requirements in the near term and it does not anticipate any required contributions through 2022.
“AT&T’s pension plan assets are invested conservatively and are well diversified,” the company said.
AT&T said in a statement announcing the loan -- of which Bank of America is the lead lender -- that it had about $12 billion in cash on hand as of Dec. 31 and received another $4 billion from preferred stock issuances in February. The company canceled its stock repurchase plan on March 20 and said it expects another $2 billion from the sale of its Central European Media Enterprises (CME) business and other smaller diviestitures and that it will use the proceeds from the sale of its Puerto Rico and U.S. Virgin Islands operations later this year to retire an outstanding interest. In addition, AT&T said it has continued access to the commercial paper, bond market and other financing activities and has a fully committed $15 billion revolver in place that it “has no need or plans to use in 2020.”
AT&T shares went as high as $30.97 in early trading April 7, up 5.2% ($1.53 each). The stock closed at $30.08 each, up 2.2% or 64 cents per share.
“The strength and relevance of our core subscription businesses, our continued execution on our business transformation initiatives, and sizing our operations to economic activity will provide cash from operations that will support network investments, dividend payments and debt retirement, as well as the ability to invest in business opportunities that arise as the economies recover,” AT&T said in its statement.
AT&T said it would provide more information on COVID-19 impacts on its Q1 earning call scheduled for April 22.