SJR.PR.A & SJR.PR.B : DBRS Says ‘Trend Positive’

Dec 04 05:12 2019 Print This Article

DBRS has announced that it:

changed the trend on all ratings of Shaw Communications Inc. (Shaw or the Company) to Positive from Stable. DBRS Morningstar also confirmed Shaw’s Issuer Rating and Senior Notes rating at BBB (low) and Preferred Shares rating at Pfd-3 (low). The trend change reflects continued subscriber and financial growth in the Company’s Wireless division, improved market position, and management’s focus on optimizing operational processes. The ratings continue to reflect Shaw’s well-established brand and market position in Western Canada, high-quality network, and wireless growth opportunity in attractive urban markets covering ~50% of the Canadian market. The ratings also consider the intense competitive landscape, high capital intensity, high dividend payout, and risks associated with the changing regulatory environment.…DBRS Morningstar expects Shaw’s financial profile to improve through the capital investment cycle, supported by sound operating performance and sustainable cash flows and reflecting EBITDA growth rather than debt reduction. Free cash flow is expected to strengthen through DBRS Morningstar’s forecast period, tracking improvement in operating income and benefits from a moderating level of capital intensity (i.e., capital expenditures-to-revenue). DBRS Morningstar expects free cash flow (before dividend payments) to be above $700 million in F2020. Shaw’s free cash flow-to-debt should improve to the mid-single-digit range. Gross lease-adjusted debt-to-EBITDA is expected to remain between 2.75x and 3.0x through F2023. DBRS Morningstar believes that Shaw has the capacity to absorb additional debt that may be required to further enhance its competitive positioning of the Wireless business in addition to what is currently contemplated. If Shaw continues to witness healthy net subscriber and financial growth in its Wireless segment and continues to deliver stable profit in its Wireline segment while sustaining its current leverage (i.e., gross debt-to-EBITDA ratio between 2.5x and 3.0x), a rating upgrade is likely. Conversely, if the Wireless division is unable to continue delivering improving profit growth and/or there is a material deterioration in Wireline operating performance in addition to a sustainable rise in leverage, a trend change to Stable may occur.

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PrefBlog

PrefBlog is presented as a public service by Hymas Investment Management Inc., Manager / Trustee of Malachite Aggressive Preferred Fundand publisher of PrefLetter, a monthly newsletter directed towards long term buy-and-hold retail investors. James Hymas, president of Hymas Investment Management Inc, with years of experience designing quantitative investment technology and applying this technology to conservative portfolios, seeks to provide institutions and retail investors with the information and advice necessary to produce top quartile returns in the preferred share market without the assumption of excess risk.

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