Welcome!

Containers Expo Blog Authors: Liz McMillan, Automic Blog, Elizabeth White, Pat Romanski, ManageEngine IT Matters

News Feed Item

Fitch Downgrades Cogeco Cable's IDR to 'BB+'; Outlook Stable

Fitch Ratings has downgraded the Issuer Default Rating (IDR) for Cogeco Cable Inc. (Cogeco) to 'BB+' from 'BBB-'. The long-term rating for the secured notes are affirmed at 'BBB-'. Fitch has removed Cogeco from Rating Watch Negative.

The Rating Outlook is Stable.

Fitch has downgraded Cogeco's IDR due to the further deterioration in the company's credit profile resulting from closing its more recent debt financed acquisition. Consequently, debt has increased pro forma for the acquisitions to 3.6 times (x) excluding the non-guaranteed debt at Atlantic Broadband (ABB). Cogeco's leverage at the November 2012 closing of the ABB acquisition was 2.7x, an increase from 1.8x. The long-term leverage expectations for Cogeco ratings at the 'BBB-' level was leverage of approximately 2.5x or less. Fitch does not expect Cogeco will reduce leverage back to this range within the next 12-15 months although leverage should reduce going forward due to both cash flow growth and debt repayment but remain above 3x at year-end 2013.

The 'BB+' ratings reflect Cogeco Cable's stable operating profile and the strength of the Canadian operations that generate the majority of the company's revenue and cash flow. Fitch believes that the Canadian operations are well supported by Cogeco Cable's competitive position anchored by its high speed internet and triple play offering. The cable systems are also clustered in less concentrated and generally less competitive suburban regions.

The PEER 1 Network Enterprises Inc. (PEER 1) acquisition offers a diversified faster growing revenue stream although it has some elevated execution risk as Cogeco pursues growth and investment opportunities outside of their traditional cable footprint. PEER 1's core business of managed services and web hosting is highly and increasingly competitive. PEER 1 focuses on delivering quality service and support to differentiate from competition that is mainly from managed and dedicated cloud providers along with local and regional operators. PEER 1 has a relatively large SMB customer base with no customer representing more than 5% of revenues.

Fitch does not expect PEER 1 operations to contribute meaningful free cash flow during the next several years given the higher capital intensity rates and need to further scale the operations. Thus PEER 1 could require additional working capital to support ongoing operations and expansion. LTM EBITDA and capital spending were both approximately CAD40 million.

Cogeco's strategic shift in pursuing its last two acquisitions is a result of the maturing of cable services and the competitive intensity that has lowered growth prospects for the cable operations. The competitive intensity in Canada is expected to increase with additional IPTV footprint expansion through fiber-to-the-home overbuilds in a material portion of Cogeco's regions. This will increase the pressure on primary service unit additions which have been decreasing due to factors mentioned above along with economic uncertainty and the tightening of credit controls. Fitch believes Cogeco also needs to upgrade technology supporting its video offering to better match capabilities with the telco's IPTV video service.

Cogeco should be able to mitigate revenue pressure through rate increases and SMB primary service unit additions which will become an increasingly important offset. In addition, the enterprise services segment provides a growing diversified revenue stream with good margins. Cogeco's capital spending intensity has been elevated relative to its peers due to success-based spending within this segment.

Cogeco used a material portion of its liquidity position to close the ABB acquisition. Cogeco's main sources of liquidity are through its credit facilities, cash position, and free cash flow (FCF). As of Nov. 30, 2012, Cogeco Cable had drawn down CAD584 million on its CAD750 million credit facility due 2017 and had CAD9 million of cash. In connection with the PEER 1 closing, Cogeco entered into new acquisition facilities. This includes a four year CAD250 million secured revolving credit facility and a four year approximately CAD equivalent $400 million secured term loan as a portion of the draw was in US dollars.

Going forward, Fitch expects Cogeco will restore at least a portion of its liquidity position using FCF to pay down the revolver over the next couple of years. Free cash flow (FCF) for the fiscal year 2012 was CAD42 million after dividend payment. Cogeco's current FCF guidance (excluding PEER 1) after dividend payment for FY2013 is in excess of CAD100 million.

Cogeco's conservative financial policies also support its current ratings. The company does not have an active share program. Additionally the most recent dividend increase of 4% is lower than in the past reflecting in part the increased leverage resulting from the acquisition.

Importantly, Fitch believes the new ABB subsidiary should be in a self-funding position. This is supported by ABB's current cash generation, a substantial tax shield related to net operating losses, a competitive environment with limited triple play competition and the expected growth from increasing underpenetrated services. ABB will increase success-based capital spending which should improve its competitive position relative to satellite operators which is the primary competitor in approximately three quarters of its markets.

SENSITIVITY/RATING DRIVERS

Negative: Future developments that may, individually or collectively, lead to negative rating include:

--Cogeco Cable leverage stays in the mid 3.5x range reflecting lack of cash flow growth and debt reduction;

--An additional material leveraging transaction;

--Greater than expected IPTV competition in Cogeco Cable territory that adversely affects operating trends;

--Negative operating trends in the Atlantic Broadband operations that requires Cogeco Cable to infuse additional funding;

--Large debt-financed acquisition;

--Reduced free cash flow prospects.

Positive: Future developments that may, individually or collectively, lead to positive rating include:

--Cogeco Cable leverage improves to less than 2.5x due to strong cash growth and debt reduction;

--Good operating trends across its three business segments;

--Pre-dividend FCF to sales of greater than 10%;

--Financial policy to maintain leverage below 2.5x.

Additional information is available at 'www.fitchratings.com'. The ratings above were solicited by, or on behalf of, the issuer, and therefore, Fitch has been compensated for the provision of the ratings.

Applicable Criteria and Related Research:

--'Corporate Rating Methodology' (Aug. 8, 2012);

--'Rating Telecom Companies: Sector Credit Factors' (Aug. 9, 2012).

Applicable Criteria and Related Research:

Corporate Rating Methodology

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=684460

Rating Telecom Companies

http://www.fitchratings.com/creditdesk/reports/report_frame.cfm?rpt_id=682323

ALL FITCH CREDIT RATINGS ARE SUBJECT TO CERTAIN LIMITATIONS AND DISCLAIMERS. PLEASE READ THESE LIMITATIONS AND DISCLAIMERS BY FOLLOWING THIS LINK: HTTP://FITCHRATINGS.COM/UNDERSTANDINGCREDITRATINGS. IN ADDITION, RATING DEFINITIONS AND THE TERMS OF USE OF SUCH RATINGS ARE AVAILABLE ON THE AGENCY'S PUBLIC WEBSITE 'WWW.FITCHRATINGS.COM'. PUBLISHED RATINGS, CRITERIA AND METHODOLOGIES ARE AVAILABLE FROM THIS SITE AT ALL TIMES. FITCH'S CODE OF CONDUCT, CONFIDENTIALITY, CONFLICTS OF INTEREST, AFFILIATE FIREWALL, COMPLIANCE AND OTHER RELEVANT POLICIES AND PROCEDURES ARE ALSO AVAILABLE FROM THE 'CODE OF CONDUCT' SECTION OF THIS SITE.

More Stories By Business Wire

Copyright © 2009 Business Wire. All rights reserved. Republication or redistribution of Business Wire content is expressly prohibited without the prior written consent of Business Wire. Business Wire shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.

@ThingsExpo Stories
What does it look like when you have access to cloud infrastructure and platform under the same roof? Let’s talk about the different layers of Technology as a Service: who cares, what runs where, and how does it all fit together. In his session at 18th Cloud Expo, Phil Jackson, Lead Technology Evangelist at SoftLayer, an IBM company, spoke about the picture being painted by IBM Cloud and how the tools being crafted can help fill the gaps in your IT infrastructure.
"delaPlex is a software development company. We do team-based outsourcing development," explained Mark Rivers, COO and Co-founder of delaPlex Software, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
"C2M is our digital transformation and IoT platform. We've had C2M on the market for almost three years now and it has a comprehensive set of functionalities that it brings to the market," explained Mahesh Ramu, Vice President, IoT Strategy and Operations at Plasma, in this SYS-CON.tv interview at @ThingsExpo, held June 7-9, 2016, at the Javits Center in New York City, NY.
Traditional IT, great for stable systems of record, is struggling to cope with newer, agile systems of engagement requirements coming straight from the business. In his session at 18th Cloud Expo, William Morrish, General Manager of Product Sales at Interoute, outlined ways of exploiting new architectures to enable both systems and building them to support your existing platforms, with an eye for the future. Technologies such as Docker and the hyper-convergence of computing, networking and sto...
Whether your IoT service is connecting cars, homes, appliances, wearable, cameras or other devices, one question hangs in the balance – how do you actually make money from this service? The ability to turn your IoT service into profit requires the ability to create a monetization strategy that is flexible, scalable and working for you in real-time. It must be a transparent, smoothly implemented strategy that all stakeholders – from customers to the board – will be able to understand and comprehe...
SYS-CON Events announced today that LeaseWeb USA, a cloud Infrastructure-as-a-Service (IaaS) provider, will exhibit at the 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. LeaseWeb is one of the world's largest hosting brands. The company helps customers define, develop and deploy IT infrastructure tailored to their exact business needs, by combining various kinds cloud solutions.
The cloud market growth today is largely in public clouds. While there is a lot of spend in IT departments in virtualization, these aren’t yet translating into a true “cloud” experience within the enterprise. What is stopping the growth of the “private cloud” market? In his general session at 18th Cloud Expo, Nara Rajagopalan, CEO of Accelerite, explored the challenges in deploying, managing, and getting adoption for a private cloud within an enterprise. What are the key differences between wh...
It’s 2016: buildings are smart, connected and the IoT is fundamentally altering how control and operating systems work and speak to each other. Platforms across the enterprise are networked via inexpensive sensors to collect massive amounts of data for analytics, information management, and insights that can be used to continuously improve operations. In his session at @ThingsExpo, Brian Chemel, Co-Founder and CTO of Digital Lumens, will explore: The benefits sensor-networked systems bring to ...
Large scale deployments present unique planning challenges, system commissioning hurdles between IT and OT and demand careful system hand-off orchestration. In his session at @ThingsExpo, Jeff Smith, Senior Director and a founding member of Incenergy, will discuss some of the key tactics to ensure delivery success based on his experience of the last two years deploying Industrial IoT systems across four continents.
Much of IT terminology is often misused and misapplied. Modernization and transformation are two such terms. They are often used interchangeably even though they mean different things and have very different connotations. Indeed, it is somewhat safe to assume that in IT any transformative effort is likely to also have a modernizing effect, and thus, we can see these as levels of improvement efforts. However, many businesses are being led to believe if they don’t transform now they risk becoming ...
SYS-CON Events announced today the Enterprise IoT Bootcamp, being held November 1-2, 2016, in conjunction with 19th Cloud Expo | @ThingsExpo at the Santa Clara Convention Center in Santa Clara, CA. Combined with real-world scenarios and use cases, the Enterprise IoT Bootcamp is not just based on presentations but with hands-on demos and detailed walkthroughs. We will introduce you to a variety of real world use cases prototyped using Arduino, Raspberry Pi, BeagleBone, Spark, and Intel Edison. Y...
Identity is in everything and customers are looking to their providers to ensure the security of their identities, transactions and data. With the increased reliance on cloud-based services, service providers must build security and trust into their offerings, adding value to customers and improving the user experience. Making identity, security and privacy easy for customers provides a unique advantage over the competition.
SYS-CON Events announced today that Venafi, the Immune System for the Internet™ and the leading provider of Next Generation Trust Protection, will exhibit at @DevOpsSummit at 19th International Cloud Expo, which will take place on November 1–3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. Venafi is the Immune System for the Internet™ that protects the foundation of all cybersecurity – cryptographic keys and digital certificates – so they can’t be misused by bad guys in attacks...
Whether your IoT service is connecting cars, homes, appliances, wearable, cameras or other devices, one question hangs in the balance – how do you actually make money from this service? The ability to turn your IoT service into profit requires the ability to create a monetization strategy that is flexible, scalable and working for you in real-time. It must be a transparent, smoothly implemented strategy that all stakeholders – from customers to the board – will be able to understand and comprehe...
"Tintri was started in 2008 with the express purpose of building a storage appliance that is ideal for virtualized environments. We support a lot of different hypervisor platforms from VMware to OpenStack to Hyper-V," explained Dan Florea, Director of Product Management at Tintri, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York City, NY.
"There's a growing demand from users for things to be faster. When you think about all the transactions or interactions users will have with your product and everything that is between those transactions and interactions - what drives us at Catchpoint Systems is the idea to measure that and to analyze it," explained Leo Vasiliou, Director of Web Performance Engineering at Catchpoint Systems, in this SYS-CON.tv interview at 18th Cloud Expo, held June 7-9, 2016, at the Javits Center in New York Ci...
For basic one-to-one voice or video calling solutions, WebRTC has proven to be a very powerful technology. Although WebRTC’s core functionality is to provide secure, real-time p2p media streaming, leveraging native platform features and server-side components brings up new communication capabilities for web and native mobile applications, allowing for advanced multi-user use cases such as video broadcasting, conferencing, and media recording.
IoT generates lots of temporal data. But how do you unlock its value? You need to discover patterns that are repeatable in vast quantities of data, understand their meaning, and implement scalable monitoring across multiple data streams in order to monetize the discoveries and insights. Motif discovery and deep learning platforms are emerging to visualize sensor data, to search for patterns and to build application that can monitor real time streams efficiently. In his session at @ThingsExpo, ...
There will be new vendors providing applications, middleware, and connected devices to support the thriving IoT ecosystem. This essentially means that electronic device manufacturers will also be in the software business. Many will be new to building embedded software or robust software. This creates an increased importance on software quality, particularly within the Industrial Internet of Things where business-critical applications are becoming dependent on products controlled by software. Qua...
SYS-CON Events has announced today that Roger Strukhoff has been named conference chair of Cloud Expo and @ThingsExpo 2016 Silicon Valley. The 19th Cloud Expo and 6th @ThingsExpo will take place on November 1-3, 2016, at the Santa Clara Convention Center in Santa Clara, CA. "The Internet of Things brings trillions of dollars of opportunity to developers and enterprise IT, no matter how you measure it," stated Roger Strukhoff. "More importantly, it leverages the power of devices and the Interne...