The Long and Short
Rogers paper attractive as deleveraging continues
This material is a Marketing Communication and does not constitute Independent Investment Research.
Rogers Communications (RCICN: Baa3/BBB-) continues to offer a deleveraging story for credit investors trying to help spread performance in telecommunications paper. RCICN bonds look attractive across the credit curve relative to ‘BBB’ peers. This includes opportunities to move down into the junior subordinated hybrid structures in the name as well as the senior unsecured paper.
RCICN bonds have traded significantly wide to similarly positioned peers since the company leveraged the balance sheet for the Shaw acquisition back in 2023 (Exhibit 1). While credit metrics remain stretched for investment grade ratings, management has a path to bring down debt/EBITDA over the next roughly two years with solid liquidity and plenty of levers to pull.
Exhibit 1. RCICN bonds offer some of the widest spreads among investment grade telecom peers
Source: Santander US Capital Markets LLC, Bloomberg/TRACE BVAL G-spread indications only
RCICN is Canada’s second largest telecom company to Bell Canada (BCECN: Baa2/BBB) and boasts the country’s largest wireless spectrum position. The oligopoly that is in place in a highly regulated industry, along with bundling capabilities, helps limit competition from single-product providers. The company’s roughly $22 billion annual revenue is generated across its wireless (49%), wireline and cable (36%) and media (15%) assets. Media holdings consist largely of its 75% ownership in Maple Leaf Sports & Entertainment (MLSE) – which owns the Maple Leafs, Raptors, Argonauts and Toronto FC – as well as its ownership of the Blue Jays and related sports network.
In April 2023, RCICN closed on its acquisition of Shaw Communications for a little under C$25 billion. The purchase vastly expanded operations into Western Canada, almost doubled internet subscribers and created a more balanced business mix among wireless and wireless subscribers. In the process, leverage increased initially to over 5x causing two-notch credit downgrades from high ‘BBB’ levels. Since that time, debt/EBITDA has gradually decreased to just over 4x as of year-end 2025. Management has plans in place to hit their target to get under 4x within a year and a half and hit their goal of 3.5x leverage within the next two to three years.
The company maintains a modest dividend policy that enables them to dedicate more free-cash flow to debt reduction instead of paying shareholders and has been reigning in capital expenses over the past year. Free cash flow increased 10% last year to reach C$3.356 billion. To further deleverage, RCICN also recently sold a minority stake in its wireless operations to Blackstone for C$7 billion. Management is using the proceeds to reduce debt. The trade-off is that RCICN loses cash flow going forward and will pay an annual dividend to Blackstone of C$400 million. They have a four-year window to buy back the stake if they can get net leverage down to 3.25x.
RCICN also has immediate-term plans to buy up the remaining 25% of MLSE that it does not own from minority stakeholders Kilmer and OMERS. The deal is expected to happen in the second half of this year. While it will be an initial outlay in capital, management can then pursue opportunities to attract other minority investors in the full entity and use proceeds to pay down debt.
The company maintains a strong liquidity position that alleviates near-term credit concerns as management executes its deleveraging strategy. RCICN currently has just under C$1.4 billion in cash on the balance sheet. In addition, there is currently C$4.145 billion in revolving credit facilities available through 2030. The RCFs help backstop the company’s commercial paper program, which remains fully available to management. Scheduled debt maturities are C$6.255 billion over the next three years with C$10.63 billion due through 2030.
In addition to RCICN’s tremendous scale and scope in the Canadian market, the operator remains among the most profitable of the North American majors. Recent EBITDA margins exceed those of Canadian peers Telus and Bell Canada, as well as US bellwethers AT&T and Verizon (Exhibit 2).
Exhibit 2. RCICN boasts highest FY2025 EBITDA margins among top competitors
Source: Santander US Capital Markets LLC, Bloomberg, Company Filings
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