AWF Magazine - December 2023.pdf

Speaking of debt reduction, a key aspect of balance sheet management, George delved into AT&T's debt history spanning two decades. He mentioned that AT&T, at one point, was the most indebted non-financial corporate entity in the market. However, significant progress has been made in reducing this debt. He also touched on how net-debt-to-adjusted-EBITDA ratios influence credit ratings, and how the growth of investment grade bonds, driven by historically low interest rates, has led to a decline in credit quality across the entire corporate spectrum.

While rising interest rates affect commercial paper and SOFR, resulting in higher costs for AT&T, George reassured that the impact should be limited as AT&T is focused on debt reduction rather than issuing new debt. He also presented an analysis of debt maturities by year, often referred to as 'debt towers', and noted that while most are manageable, the 2026 figure is higher than preferred.

George concluded by sharing insights on the impact of rising interest rates on working capital programs, which were previously beneficial during the era of low rates, but now pose liquidity management and interest cost challenges. He ended by emphasizing the role of AWF members in balance sheet management, stating that they can contribute by optimizing their control areas and spending company money judiciously, as if they were shareholders themselves.

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