IGM.PR.B Downgraded to P-2(High) by S&P

Standard & Poor’s has announced:

  • •On Aug. 31, 2017, IGM announced the closing of a minority stake acquisition in China Asset Management Co. Ltd.
  • •We revised the financial risk profile assessment to “modest” from “minimal” because of the increase in debt to fund the transaction combined with lower coverage metrics.
  • •We are lowering our long-term issuer credit rating and unsecured debt ratings on IGM to ‘A’ from ‘A+’ and lowering our preferred stock ratings to ‘BBB+/P-2(high)’ from ‘A-/P-1(low)’. We are also removing these ratings from CreditWatch, where they were placed with negative implications on Dec. 29, 2016.
  • •The stable outlook on IGM reflects our expectation that the company will operate with leverage levels slightly below 1.5x and interest coverage metrics between 9x and 10x during the next 18 to 24 months. It also incorporates our view that investment performance will remain solid and assets under management will grow organically at a modest pace.

The downgrade of IGM reflects the completion of the China Asset Management Co. Ltd. (CAMC) transaction, which was initially announced in December 2016. Through Mackenzie Investments, a subsidiary of IGM, the company acquired a 13.9% stake in CAMC for a purchase price of approximately C$633 million. The acquisition was funded primarily through the issuance of C$600 million in unsecured notes (split in a C$400 million 10-year tranche and a C$200 million 30-year tranche) in January 2017.

The stable outlook reflects S&P Global Ratings’ expectation that IGM will operate with leverage metrics slightly below 1.5x and interest coverage metrics between 9x and 10x during the next 18 to 24 months. The stable outlook also incorporates our expectation that IGM will continue to exhibit positive organic inflows, solid investment performance and sizeable on-balance-sheet investments.

S&P’s Credit Watch Negative was reported on PrefBlog.

IGM.PR.B is a 5.90% Straight Perpetual that commenced trading 2009-12-8 after being announced 2009-11-30. The issue was poorly received and underwriters had to blow out their inventory shortly after opening day.

The issue is tracked by HIMIPref™ and is included in the PerpetualPremium subindex.

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