DBRS Comments on Cogeco Cable’s Sale of Cabovisão in Portugal

DBRS notes that the announcement made yesterday by Cogeco Cable Inc. (Cogeco Cable or the Company) that it has sold its Portuguese subsidiary Cabovisão – Televisão por Cabo, S.A. (Cabovisão) does not affect the Company’s overall credit profile or the BBB (low) rating on its Senior Secured Notes & Debentures. The trend on the rating remains Stable.

Cogeco Cable announced the sale of Cabovisão to ALTICE, a European communications and media investor, for sale proceeds of EUR 45 million. These proceeds were received on February 29, 2012, upon closure of the transaction.

As DBRS had stated in its most recent rating report dated October 15, 2011, Cogeco Cable’s business risk profile is driven by its Canadian cable operations, which accounted for the majority of its total revenue and EBITDA (over 87% and 96% for F2011). Additionally, the Company had already completely written down its investment in Portugal in Q3 F2011. DBRS notes that this segment had been challenged by both intense competition and the generally weak economic environment in Europe.

While the Portuguese segment generated $21 million of EBITDA in F2011, this was small relative to the $545 million of EBITDA generated by its Canadian segment in F2011. With proceeds of EUR 45 million, the sale does not have a material impact on Cogeco Cable’s overall financial risk profile, which remains healthy, with gross debt-to-EBITDA for the LTM Q1 F2012 weakening from 1.75 times to 1.82 times on a proforma basis.

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

The applicable methodology is Rating the Communications Industry, which can be found on our website under Methodologies.