Morningstar DBRS Assigns Credit Rating of BB (high) With Recovery Rating of RR4 and a Stable Trend to Cogeco Communications Inc.’s New Senior Unsecured Notes

DBRS Limited (Morningstar DBRS) assigned a credit rating of BB (high) with a recovery rating of RR4 and a Stable trend to Cogeco Communications Inc.’s (Cogeco or the Company) $275 million 6.125% Senior Unsecured Notes due 2029. The recovery rating of RR4 suggests a recovery of 30% to 60% in a default scenario for the Senior Unsecured Notes. There is no change to the Company’s Issuer Rating of BB (high), Stable trend, or its Senior Secured Notes & Debentures rating of BBB (low), Stable trend.

The Senior Unsecured Notes are direct and unsubordinated unsecured obligations of the Company and rank equally in right of payment (pari passu), without discrimination, preference, or priority, with all of the Company’s existing and future unsecured senior indebtedness. The Senior Unsecured Notes are effectively junior in right of payment to all of the Company’s existing and future secured senior indebtedness (including indebtedness under the Company’s syndicated credit agreement and the existing senior secured notes), to the extent of the value of the assets securing such senior indebtedness. The Senior Unsecured Notes are guaranteed by the designated subsidiaries consisting of all of Cogeco’s wholly owned Canadian subsidiaries (the Guarantors).

Morningstar DBRS expects the net proceeds of the Senior Unsecured Notes issuance will be used by Cogeco to repay existing indebtedness (including the syndicated credit agreement) and for other general corporate purposes.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (January 23, 2024): https://dbrs.morningstar.com/research/427030/morningstar-dbrs-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

BUSINESS RISK ASSESSMENT (BRA) AND FINANCIAL RISK ASSESSMENT (FRA)
(1) Weighting of BRA Factors
In the analysis of Cogeco, the relative weighting of the BRA factors was approximately equal.

(2) Weighting of FRA Factors
In the analysis of Cogeco, the relative weighting of the FRA factors was approximately equal.

(3) Weighting of the BRA and the FRA
In the analysis of Cogeco, the BRA and the FRA carry approximately equal weight.

Notes:
All figures are in Canadian dollars unless otherwise noted.

Morningstar DBRS applied the following principal methodology: Global Methodology for Rating Companies in the Communications Industry (July 20, 2023): https://dbrs.morningstar.com/research/417420/global-methodology-for-rating-companies-in-the-communications-industry.

The following methodologies and criteria have also been applied: DBRS Morningstar Global Criteria: Recovery Ratings for Non-Investment-Grade Corporate Issuers (August 30, 2023): https://dbrs.morningstar.com/research/420063/dbrs-morningstar-global-criteria-recovery-ratings-for-non-investment-grade-corporate-issuers.

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/397223.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info-DBRS@morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. Morningstar DBRS trends and credit ratings are under regular surveillance.

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

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