TELUS ANNOUNCES JUNIOR SUBORDINATED NOTE OFFERING

TELUS has priced an $800 million re-opening of its 6.25% and 6.75% fixed-to-fixed rate junior subordinated notes, Series CAR and CAS respectively, both maturing on July 21, 2055; the Series CAR notes were priced at $102.625 per $100 principal amount for a yield of 5.612% until July 21, 2030, while the Series CAS notes were priced at $104.500 per $100 principal amount for a yield of 6.127% until July 21, 2035. The proceeds are earmarked for debt reduction, including commercial paper, and general corporate purposes, with the offering expected to close around June 19, 2025.

Analysis

TELUS has announced the pricing of an $800 million re-opening of two series of its fixed-to-fixed rate junior subordinated notes, Series CAR and Series CAS, both maturing in July 2055, signaling a strategic move to manage its capital structure and debt profile. The Series CAR notes, with an initial 6.25% coupon, were priced at $102.625 per $100 principal, yielding 5.612% per annum until July 21, 2030, while the Series CAS notes, with an initial 6.75% coupon, were priced at $104.500 per $100 principal, yielding 6.127% per annum until July 21, 2035; both series feature five-year interest rate resets based on the prevailing five-year Government of Canada rate plus a specified spread, with the original coupon rate acting as a floor. Proceeds from this offering, expected to close on or about June 19, 2025, are primarily designated for reducing outstanding indebtedness, including commercial paper, and for other general corporate purposes, a move that should improve liquidity and extend the company's debt maturity profile. Significantly, credit rating agencies have assigned 50% equity credit to these notes, which positively impacts TELUS's leverage metrics from a ratings perspective without diluting equity shareholders. The offering, led by a syndicate including CIBC World Markets Inc., Scotia Capital Inc., and TD Securities Inc., reflects access to long-term capital, with the pricing above par indicating current market appetite for TELUS's debt. This financing activity aligns with the moderately positive sentiment indicated by market signals (overall sentiment 0.4, ticker TU sentiment 0.5), underscoring a prudent financial management step.

Key Decisions for Investors

• Fixed-income investors may consider the re-opened TELUS junior subordinated notes for yield generation, noting their initial yields of 5.612% (Series CAR) and 6.127% (Series CAS), long 30-year maturities, interest rate reset features, and the favorable 50% equity credit assigned by rating agencies to the issuer.
• Equity investors should view this $800 million debt issuance as a constructive balance sheet management initiative by TELUS, as the proceeds are intended to reduce existing debt, particularly short-term commercial paper, thereby enhancing the company's debt maturity profile and liquidity.
• Investors should monitor TELUS's overall leverage and interest coverage ratios following this issuance to assess the impact of this long-term subordinated debt on its financial flexibility, while acknowledging the strategic benefits of refinancing and the positive implications of the 50% equity credit.