Hamish Fletcher

Business reporter for the NZ Herald

Chorus shares hit new low after warning from Moody's

Shares in the lines infrastructure player fell 13c yesterday and closed at $2.78.  Photo / APN
Shares in the lines infrastructure player fell 13c yesterday and closed at $2.78. Photo / APN

Chorus' share price reached another record low yesterday as Moody's indicated it could cut the company's credit rating.

Shares in the lines infrastructure player fell 13c yesterday and closed at $2.78.

It follows a 49c drop on Monday when the Commerce Commission proposed to cut the amount Chorus could charge internet retailers for unbundled bitstream access (UBA).

This service enables internet retailers to supply broadband services to households and businesses without the need to replicate Chorus' local copper lines or have their own equipment in telephone exchanges.

If the commission's UBA decision was finalised, Chorus said it could reduce its annual earnings before interest, tax, depreciation and amortisation (ebitda) by $150to $160 million from December 2014.

As a result of the proposed cut, to be finalised in June, Moody's said it would review Chorus' Baa2 rating and may downgrade it. The downgrade would affect US$2 billion of Chorus' debt.

Although the UBA decision was only a draft, Moody's said "the potential for a final adverse outcome on Chorus' credit profile is meaningful".

But Standard & Poor's said its BBB/stable rating of Chorus was unaffected by the Commerce Commission's move.

S&P said it expected the draft decision would be "subject to significant political deliberation" as it could affect the take-up of fibre services over the Government's ultra-fast broadband scheme.

"Accordingly, in our view, it is likely that the draft UBA decision will be subject to amendment before it becomes final," the agency said. Prime Minister John Key on Monday called the draft determination "problematic" and would not rule out intervening on the matter.

- NZ Herald

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