SJR.PR.A: Credit Outlook Positive, says S&P

Standard & Poor’s has announced:

  • •Calgary-based Shaw Communications Inc. has notably improved its credit ratios in the last few quarters.
  • •We are affirming our ‘BBB-‘ corporate credit rating on Shaw and revising the outlook to positive from stable.
  • •The positive outlook reflects the potential of an upgrade in the next 12-18 months should the company demonstrate its commitment to managing adjusted debt to EBITDA at the mid-2x area and its operating performance is consistent with our base-case scenario.


Shaw’s subscription-based cable operations are the primary driver for the ratings given that this segment generates the majority of the company’s revenue, operating income, and cash flow and offers good asset protection to creditors, in our opinion. Shaw’s business risk profile is also supported by our assessment of the company’s management and governance as satisfactory.

Tempering factors, in our view, include rising competitive risks; video subscriber losses owing to the more ubiquitous triple- and quad-play offerings from well-capitalized telecom rivals and cord cutting; rising regulatory risk as regulators look for ways to unbundle video distribution (we estimate that Shaw has about 50% overall revenue exposure to video); potential for margin pressure stemming from a declining subscriber base and ongoing retention efforts; slowing overall revenue growth given a mature addressable market; the company’s historically acquisitive growth strategy; and the high capital expenditures, in general, needed to sustain competitiveness and maintain service differentiation.

The positive outlook reflects the potential of an upgrade in the next 12-18
months should the company demonstrate its commitment to managing adjusted debt to EBITDA at the mid-2x area and operating performance is consistent with our base-case scenario.

We could revise our outlook to stable should higher competition (likely from Telus) materially affect profitability or if substantive debt-funded shareholder distributions or acquisitions cause Shaw’s adjusted debt-to-EBITDA ratio to increase to the 3x area for a prolonged period.

SJR.PR.A commenced trading at the end of May, 2011. It is tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

Leave a Reply

You must be logged in to post a comment.