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Rogers corporate head office and headquarters seen from Ted Rogers Way in Toronto on Monday, Oct. 25, 2021.Evan Buhler/The Canadian Press

Rogers Communications Inc. RCI-N is tapping credit markets for $19-billion, locking in financing for its planned takeover of Shaw Communications Inc. SJR-N ahead of an expected rise in interest rates.

Rogers launched a marketing campaign that expected to sell US$7.05-billion of bonds to U.S. investors and an additional $4.25-billion in Canadian dollar-denominated bonds. The offerings are expected to be priced as early as Monday evening.

The Toronto-based telecom company is expected to borrow just less than $6-billion from a syndicate of banks in term loans, according to two banking sources. The Globe and Mail is not naming the sources because they are not authorized to speak for the company.

A spokesperson for Rogers declined to comment.

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The new debt will replace a $19-billion bridge loan Rogers struck with Bank of America Corp. last March when it announced an agreement to acquire Calgary-based Shaw. The takeover still requires federal government approval and is expected to close by the end of June.

Rogers decided to refinance the bridge loan now because credit markets are receptive, according to sources, and the company was concerned that rising interest rates and the uncertainty that has come with Russia’s invasion of Ukraine will make it more expensive to borrow later this year. The new bonds and the term loans carry lower interest rates than the $19-billion bridge loan.

If the Shaw acquisition fails to close, Rogers will redeem the new bonds at a small premium to their selling price, according to sources. Bankers also said if Rogers is forced to sell Shaw assets, such as its Freedom Mobile cellphone business, to win federal approval for the takeover, proceeds of the sale will be used to pay down the company’s term loans. Analysts estimate Shaw’s wireless business is worth more than $3-billon.

Rogers is selling U.S. bonds that mature in three, five, 10, 20 and 30 years, and Canadian dollar debt that is due to be repaid in three, seven, 10 and 20 years. The bond offerings range in size from $750-million to US$2-billion, with the largest financings coming in the form of long-term debt.

Interest rates on Rogers’s debt reflect the fact that the company is considered investment grade by credit rating agencies, and the rates are far lower than what the company paid when founder Ted Rogers ran up debt and borrowed in the U.S. junk bond market to expand the business in the 1980s. Non-investment grade companies are currently paying more than twice as much as Rogers to borrow in U.S. junk bond markets.

Rates on the new bonds range from 130 basis points above the comparable government debt for short-term borrowing, to 245 basis points over the government benchmark on the 30-year U.S. bonds, and 325 basis points more than on 30-year Canadian government bonds. There are 100 basis points in a percentage point. Sources said the offering was well received by institutional investors and Rogers expects to pay significantly lower rates than the telecom company assumed when it began marketing the offering early Monday.

In a news release on Monday, Moody’s Investors Service said it assigned a Baa1 rating to what the credit rating agency described as a “proposed senior unsecured notes being offered in multiple tranches and in U.S. and Canadian dollars.”

In recent months, Rogers raised $2-billion selling hybrid securities to Canadian investors and an additional US$750-million with a hybrid offering targeting the U.S. market. Proceeds from those transactions were used to pay down debt taken on last July, when Rogers spent $3.3-billion to acquire additional wireless spectrum from the federal government.

Rogers acquisition of Calgary-based Shaw is valued at a total of $26-billion, and would see the Toronto-based company take on $6-billion of Shaw debt. Rogers executives have consistently said the company will maintain an investment grade credit rating and will sell assets, including real estate, to pay down debt once the takeover closes.

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