8-KOther Events

AT&T INC. 8-K Report, Corporate Update (Aug 27, 2018)

Filed August 27, 2018For Securities:TT-PCTBBT-PA

Summary

AT&T Inc. (T) announced on August 27, 2018, through its subsidiaries, its intention to redeem specific tranches of senior notes. This action involves the full redemption of $58 million in 5.875% Senior Notes due October 1, 2019, $57 million in 5.200% Senior Notes due March 15, 2020, and a significant $1.4 billion in 4.875% Notes due March 15, 2020. The redemption is scheduled for September 27, 2018. This move suggests AT&T is actively managing its debt structure, likely to optimize its cost of capital or to refinance at more favorable terms following its recent acquisition of Time Warner. Investors should note that the redemption will occur at "make-whole" prices, which typically means the issuer pays a premium above the face value and accrued interest to compensate noteholders. The cessation of interest accrual on these notes after the redemption date will impact the income received by the holders.

Key Highlights

  • 1AT&T subsidiaries will redeem all outstanding 5.875% Senior Notes due Oct 1, 2019 (DIRECTV Holdings LLC/Financing Co.).
  • 2AT&T subsidiaries will redeem all outstanding 5.200% Senior Notes due Mar 15, 2020 (DIRECTV Holdings LLC/Financing Co.).
  • 3AT&T subsidiaries will redeem all outstanding 4.875% Senior Notes due Mar 15, 2020 (Time Warner Inc.).
  • 4The total principal amount to be redeemed is approximately $1.515 billion ($0.058B + $0.057B + $1.4B).
  • 5The redemption date for all notes is set for September 27, 2018.
  • 6The notes will be redeemed at "make-whole" prices, indicating a potential premium over face value.
  • 7Following redemption, interest on these notes will cease to accrue, and they will no longer be considered outstanding.

Frequently Asked Questions

AT&T is proactively managing its debt portfolio by redeeming these specific senior notes. This action is likely aimed at optimizing its capital structure, potentially refinancing debt at lower interest rates, or aligning its debt obligations with its strategic objectives following the Time Warner acquisition.

"Make-whole" redemption prices mean AT&T will pay noteholders an amount that compensates them for the remaining interest they would have earned if the notes had matured as originally scheduled. This usually involves a premium above the principal amount and accrued interest.

The redemption of these notes signifies AT&T's ability to access capital to manage its debt obligations. It could lead to a reduction in future interest expenses if refinanced at a lower rate, which would be positive for profitability. However, it also involves an immediate cash outflow.

The redemption covers three series of notes: $58 million of 5.875% Senior Notes due Oct 1, 2019 (from DIRECTV subsidiaries), $57 million of 5.200% Senior Notes due Mar 15, 2020 (from DIRECTV subsidiaries), and $1.4 billion of 4.875% Notes due Mar 15, 2020 (from Time Warner Inc.).