DBRS Comments on the Closure of Cogeco’s PEER 1 Acquisition

On December 21, 2012, DBRS placed Cogeco Cable Inc.’s (Cogeco or the Company) Issuer Rating of BB (high) and Senior Secured Notes & Debentures rating of BBB (low) Under Review with Negative Implications following the Company’s announcement that it had entered into an agreement to acquire PEER 1 Network Enterprises, Inc. (PEER 1). Cogeco is offering PEER 1 shareholders $3.85 in cash per share, valuing PEER 1’s equity at approximately $526 million on a fully diluted basis (estimated at $635 million on an enterprise value basis).

In our December 21, 2012, press release, DBRS stated that its review would focus on the business and execution risk associated with the PEER 1 acquisition, along with the Company’s ability and willingness to restore financial leverage to a level appropriate for its current rating category within a reasonable time frame. As the newly raised debt was to rank pari passu with that of current senior secured noteholders, DBRS stated that it would also review the RR1 recovery rating of Cogeco’s Senior Secured Notes & Debentures.

On January 29, 2012, Cogeco announced the closing of the PEER 1 acquisition, funded through a $650 million acquisition credit facility (Canadian-dollar equivalent, ranking pari passu with current senior secured notes). DBRS has not yet resolved the Under Review status of Cogeco’s Issuer Rating and Senior Secured Notes & Debentures rating, as all or a portion of the acquisition credit facility may be refinanced on terms or in a form substantively different from the current facility in fairly short order. DBRS will conclude its review once it gains clarity regarding the Company’s refinancing intentions.

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

The applicable methodologies are Rating the Communications Industry and DBRS Recovery Ratings for Non-Investment Grade Corporate Issuers, which can be found on our website under Methodologies.