S&P applies BB to Videotron notes

S&P said it assigned its BB issue-level rating and 3 recovery rating to Videotron Ltee's proposed $600 million senior unsecured notes due 2027.

The notes are rated the same as the company’s corporate credit rating. The 3 recovery rating corresponds with meaningful recovery (50%-70%; rounded estimate 65%) in the default scenario.

Proceeds will be used to repay amounts drawn under the company's revolving credit facilities, and to fund early redemption of Videotron notes due in 2021.

The issuance will have no effect on S&P’s expected consolidated credit measures for Quebecor Media Inc. (QMI), Videotron's 100% owner. Concurrently, QMI intends to early redeem its C$325 million notes due 2021. The funds from the new issue support Quebecor Media’s consolidated liquidity.

S&P said its view of Quebecor Media’s financial risk profile as significant reflects the company's adjusted debt to EBITDA of 3.4 times at Dec. 31, 2016. The agency expects slightly improving debt leverage in the next two years as modest EBITDA growth (primarily from telecommunications) and modest discretionary cash flows help sustain leverage to the low 3 times area, absent any strategic initiatives.

"The ratings on QMI are based on our credit risk profile of the company and its consolidated subsidiaries, including wholly owned Videotron, the largest cable TV provider in Quebec and third-largest in Canada," S&P credit analyst Aniki Saha-Yannopoulos said in a news release.

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