Cogeco Communications Inc.

The stable outlook reflects S&P Global Ratings' expectation that Cogeco will focus on growth prospects in its existing operating markets and acquisition opportunities in the U.S. as they arise. Absent any significant debt-funded acquisitions, we expect that modest earnings growth and moderate discretionary cash flow (post-shareholder remuneration) should contribute to adjusted leverage remaining close to 3x through fiscal 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. Alternatively, we could lower the rating if the company performs a

...A modest positive effect from the COVID- 19 pandemic to keep leverage measures about 3.0x . The sudden-stop to the economy amid the COVID-19 pandemic led to a slowdown in 2020. Similar to its North American cable peers, Cogeco Communications Inc.'s (Cogeco) operating performance has been resilient throughout the pandemic. The company witnessed healthy subscriber growth for its internet product offering due to the widespread adoption of work-from-home practices across Cogeco's operating markets. At the same time, the pandemic reduced the pace of video and wireline telephony declines leading to low-single-digit revenue growth. In S&P Global Ratings' view, similar trends are likely to persist through fiscal 2021, reflecting continued internet subscriber additions from U.S. subsidiary Cogeco Communications (USA) Inc.'s (formerly, Atlantic Broadband; ##/Stable/--) and the Canadian operations, the Florida expansion, and U.S. commercial growth leading to low-single-digit consolidated organic EBITDA...

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