EMA Trend Now Stable, Says DBRS

DBRS has announced that it:

has today confirmed Emera Inc.’s (Emera) Issuer Rating, Medium-Term Notes and Preferred Shares – Cumulative at BBB (high), BBB (high) and Pfd-3 (high), respectively, and changed the trends on all to Stable from Negative. This trend change reflects DBRS’s expectations that Emera will continue to reduce its non-consolidated debt-to-capital ratio, in the medium term, to below 30% to be in line with its rating category. The resolution of the Negative trend followed a full assessment of Emera’s overall financing strategy on proposed projects and plans to reduce its non-consolidated debt to levels commensurate with its current rating. Emera is currently on track to deleverage its non-consolidated balance sheet, as reflected by (1) a $250 million preferred shares offering in June 2012 and (2) a bought deal offering of approximately $200 million, which settled on December 14, 2012. Pro forma the bought deal offering, Emera’s unconsolidated debt-to-capital is approximately 38% (versus approximately 41.5% as of June 30, 2012).

The credit quality of Emera is based on its low business risk and is supported by its strong portfolio of diversified regulated businesses operating in a reasonable regulatory environment. Emera’s business risk profile is viewed as strong. Emera’s earnings and cash flow are largely generated by its relatively low-risk regulated subsidiaries. Furthermore, dividends and interest income flowing up from its operating subsidiaries continue to adequately cover Emera’s interest and operating costs.

On April 3, 2012, DBRS changed the trend on Emera’s rating to Negative from Stable. This rating action reflected DBRS’s concern regarding the ongoing high degree of non-consolidated leverage at the holding company level for the current rating.

The company’s preferred shares outstanding are EMA.PR.A and EMA.PR.C, both tracked by HIMIPref™ and both assigned to the Scraps index on credit concerns. The assignment of a negative trend in April 2012 was reported on PrefBlog.

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