Telstra issues $541m bond as it loads up on cheap debt

Telstra is not letting a crisis go to waste.

The Australian telco is taking advantage of low interest rates to load up on debt to strengthen its balance sheet.

It has just announced a €500 million ($541 million) bond issue, in addition to A$940 million ($567 million) in bank facilities it has secured in the past month.

The bond issue and the additional bank facilities are both well below Telstra's current average cost of funds, the company said Friday.

It says it now has A$3.6 billion ($2.3 billion) of committed bank facilities.

"Telstra's continued access to low-cost capital and A-band credit rating demonstrates the strength of the business during this very volatile time," CEO Andrew Penn said.

Additionally, it showed the company's attractiveness to global capital markets while further strengthening its liquidity position.

Proceeds from the ten-year notes will be used for general corporate purposes including pre-funding of future debt maturities.

Meanwhile, Telstra has accelerated its capex program and suspended its long-term restructure plan, delaying the removal of hundreds of staff positions.

In a joint letter to shareholders, also issued Friday, Penn and Chairman John Mullen said they had brought forward A$500 million ($318 million) of capex from the first half of 2021 into the current calendar year.

It would be deployed to increase network capacity and accelerate Telstra's 5G rollout as well as other "digital enablement" projects.

They also said they had put on hold any further job reductions over the next six months. The Telstra2022 plan, unveiled in June 2018, envisages cutting 8,000 positions and removing two to four layers of management. (See Telco Job Prospects Go From Bad to Worse.)

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Instead, they said Telstra was hiring 3,500 temporary call center staff to cope with heavy call volumes.

In other economic support measures, it says it is accelerating short-term payment terms for small businesses to 20-day payment terms and is extending all sponsorships that expire this year for another 12 months.

Early this month rating agencies S&P and Moody's reaffirmed Telstra's credit rating as A- (stable) and A2 (stable) respectively.

— Robert Clark, contributing editor, special to Light Reading