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Moody’s had already placed its ratings of Rogers’s debt – including senior unsecured notes – under review for a possible downgrade in March of this year.Tijana Martin/The Canadian Press

The governance of Rogers Communications Inc. – where a battle for control has thrown the company into turmoil – is “materially credit negative,” credit-rating agency Moody’s Investors Service said on Thursday.

Moody’s had already placed its ratings of Rogers’s debt – including senior unsecured notes – under review for a possible downgrade in March of this year, when the Toronto-based telecom giant announced its $26-billion acquisition of Shaw Communications Inc. The deal is awaiting regulatory approval. That review was prompted by the probability that the deal will increase Rogers’s leverage, since it will be funded with debt.

Now, in addition to the leverage issue, Moody’s said on Thursday that “governance risk” at Rogers is high also “because of recent family and board-level disagreements and related management uncertainties.”

The dispute at Rogers is now before a court in B.C., where lawyers for Edward Rogers are seeking approval for his push to replace five of the company’s independent directors with his own slate of candidates. A decision is expected on Friday.

Mr. Rogers is chair of the Rogers Control Trust, which gives him the authority to vote 97.5 per cent of the company’s voting shares. But other members of the Rogers family, including his mother, Loretta, and sisters Martha and Melinda, have opposed the move, saying that Mr. Rogers is under obligation to call a shareholder meeting to make such changes.

Mr. Rogers’s attempt to overhaul the board came after The Globe and Mail reported on his plan to replace chief executive officer Joe Natale with then-chief financial officer Tony Staffieri. The plan was voted down in September by the company’s board of directors, which subsequently voted to oust Mr. Rogers as chairman. The board also decided to undertake a corporate governance review and implement a new executive oversight committee to enshrine “clear protocols” for interactions between Mr. Rogers and the management team.

Mr. Rogers, as chairman of the Rogers Control Trust, then sought to replace five directors and to reinstate himself as the company’s chairman.

Moody’s currently has a Baa1 rating for Rogers, which it defines as a “moderate credit risk.” The agency could revise the rating before the closing of the Shaw deal, if it determines the board issues are having a “sustainable detrimental effect” on Rogers’s credit profile, according to an issuer comment released on Thursday.

“Separate from governance concerns related to the Shaw acquisition, the ongoing disagreement between family members, the disagreement between Edward Rogers and the current CEO, past and current uncertainty of the role of Rogers’ CEO versus Edward Rogers as the chair, and the true independence of Rogers’ directors, has materially increased our governance concerns,” Moody’s senior analyst Peter Adu wrote in the issuer comment. “Recent board-level actions are not expected of a Baa1-rated debt issuer.”

A spokesperson for Rogers declined to comment.

With files from Alexandra Posadzki

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