DBRS Morningstar Maintains Shaw Communications Inc.’s Ratings Under Review with Developing Implications

DBRS Limited (DBRS Morningstar) maintained the Under Review with Developing Implications status on all ratings of Shaw Communications Inc. (Shaw or the Company). The ratings were placed under review following the March 15, 2021, announcement of an agreement to combine Shaw with Rogers Communications Inc. (Rogers; rated BBB (high) and Under Review with Negative Implications by DBRS Morningstar) in a $26 billion transaction (including the assumption of approximately $6 billion of Shaw’s debt; the Transaction).

Shaw shareholder approval for the Transaction and a court-approved plan of arrangement for the implementation of the Transaction under the Business Corporations Act (Alberta) were gained in 2021. Additional closing conditions were obtained through 2022 and year-to-date 2023. On March 24, 2022, the Canadian Radio-television and Telecommunications Commission approved the transfer of Shaw’s broadcasting services. On August 12, 2022, Rogers announced a definitive agreement to sell Shaw’s wireless business, Freedom Mobile Inc. (Freedom Mobile), to Quebecor Inc. (Quebecor) conditional on, among other items, the completion of the Transaction with Shaw. On December 30, 2022, the Competition Tribunal (the Tribunal) released its decision that Shaw’s agreement to sell its subsidiary Freedom Mobile to Quebecor-owned Videotron Ltd. (Videotron) prior to the closing of the sale to Rogers ensured that competition would not be lessened substantially, thereby dismissing the Competition Bureau’s (the Bureau) application to block the Transaction. After an appeal of the Tribunal’s decision, on January 24, 2023, the Federal Court of Appeals dismissed the Bureau’s appeal and upheld the Tribunal’s decision. Subsequently, the Bureau announced that it would not proceed with any further legal challenges to the Transaction after their appeal was dismissed. Looking ahead, the Transaction requires approval from the Minister of Innovation, Science and Economic Development Canada (ISED) related to the proposed transfer of Freedom’s spectrum licences to Videotron. While the timing of the ISED decision is unknown, Rogers, Shaw, and Quebecor have agreed to extend the outside date of the merger until March 31, 2023.

The status of Under Review with Developing Implications reflects Rogers’ potential assumption of approximately $6 billion of Shaw’s debt should the Transaction close according to terms substantially similar to those initially proposed. DBRS Morningstar expects Shaw’s debt will effectively rank pari passu with Rogers’ existing senior unsecured indebtedness.

DBRS Morningstar will proceed with its review as more information becomes available and aims to resolve the Under Review with Developing Implications status in a timely manner after the announcement of the closing of the Transaction.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings (May 17, 2022).

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

The principal methodologies applicable to the ratings are Rating Companies in the Communications Industry (July 21, 2022; https://www.dbrsmorningstar.com/research/400203) and DBRS Morningstar Global Criteria: Preferred Share and Hybrid Security Criteria for Corporate Issuers (October 20, 2022; https://www.dbrsmorningstar.com/research/404248).

The rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/397223/interplay-of-global-corporate-finance-rating-methodologies-when-analyzing-corporate-finance-transactions.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at [email protected].

The rated entity or its related did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com or contact us at [email protected].

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