DUFF & PHELPS: PACIFIC BELL $300 MILLION 7-3/8 PERCENT DEBENTURES DUE 2043 RATED 'AA'
CHICAGO, July 12 /PRNewswire/ -- Duff & Phelps Credit Rating Co. has assigned a rating of `AA' (Double-A) to Pacific Bell's $300 million issue of 7-3/8 percent debentures due July 15, 2043. The debentures are non-callable for twenty years and were priced at 99.373 to yield 7.423 percent to maturity. Proceeds will be used to refinance $300 million of 9 percent notes due 2018. Duff & Phelps expects stable financial performance from Pacific Bell under the California incentive regulation plan that combines automatic rate changes based on the rate of inflation less a 4.5 percent productivity factor with earnings sharing above a 13 percent return on invested plant. Pacific Bell's interstate rates are also regulated under a price cap plan, with a productivity factor of 3.3 percent. Although the California economy remains weak, growth in demand for new services combined with operating expense controls and lower interest expense has allowed Pacific Bell to meet the productivity factors. Pacific Bell's liquidity measures are excellent, with construction spending virtually fully funded from internal sources. The proposed spin-off of wireless operations by its parent, Pacific Telesis Group, will have no impact on the credit quality of Pacific Bell. Pacific Bell will remain the primary subsidiary of a somewhat streamlined holding company. No change is planned in the management, operation, or capitalization of Pacific Bell. The California regulators have committed to increasing intraLATA toll competition, but have identified a number of issues that need to be resolved before increased competition can begin. This poses a significant risk for Pacific Bell given that a relatively high proportion of its revenues (24 percent) come from intraLATA service. Pacific Bell is the second largest local telecommunications company in the United States serving 14.4 million lines in California, 78 percent of all lines in the state. Roughly 35 percent of the access lines are in Los Angeles and vicinity and another 25 percent of lines are in San Francisco and surrounding areas. -0- 7/12/93 /CONTACT: James J. Stork, CFA of Duff & Phelps Credit Rating Co., 312-368-3125/
CO: Pacific Bell ST: California IN: TLS SU: RTG
WB -- NY049 -- 0437 07/12/93 12:51 EDT
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|Date:||Jul 12, 1993|
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