Cogeco Communications Inc.

The stable outlook reflects S&P Global Ratings' expectation that Cogeco will focus on growth from existing operations and acquisition opportunities in the U.S. as they arise. Absent any significant debt-funded acquisitions, we expect that modest earnings growth and solid discretionary cash flow should contribute to adjusted leverage remaining close to 3x through 2021. We could lower the rating if we expect that consolidated debt leverage will remain elevated at the high-3x area for a sustained period. This could result from large debt-financed acquisitions and subsequent difficulties in deleveraging owing to operational challenges, higher capital spending, or margin pressures in the core cable business. The potential for additional acquisitions or shareholder-friendly initiatives limits upside rating potential. However, we could consider an

...In spite of a competitive landscape, we expect the company to maintain above-average EBITDA margins. S&P Global Ratings forecasts Cogeco Communications Inc. (Cogeco) to continue generating strong adjusted EBITDA margins at about 48%-50% for the next two years. Even though the company's Canadian broadbrand segment experienced reduced customer adds and some margin compression in early 2019 following the implementation of a new customer management system (CMS), we view that as temporary and expect the segment to return to normalized customer adds in fiscal 2020. With the stabilization of the CMS, we now expect operating margins to continue to show improvements in 2020 with increasing competition pressuring thereafter....

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