EMA.PR.A: DBRS Assigns Negative Trend

DBRS has announced that it:

has today confirmed Emera Inc.’s (Emera or Holdco) Medium-Term Notes rating and Cumulative Preferred Shares rating at BBB (high) and Pfd-3 (high), respectively, and changed the trends on both to Negative from Stable. Emera’s ratings continue to be supported by strong and stable operating cash flows generated by its relatively low-risk regulated subsidiaries. Dividends and interest income flowing up from its operating subsidiaries continue to cover Emera’s interest and operating costs.

However, the Negative trend reflects DBRS’s concern regarding the ongoing high degree of non-consolidated leverage at the Holdco level for the current rating. On a non-consolidated basis, the debt-to-capital ratio has continued to deteriorate since 2008 and remains at approximately 40% as at December 31, 2011. DBRS acknowledges that a significant portion of the debt at the Holdco level was used to fund acquisitions of contracted/regulated assets that add diversification to Emera’s business profile. Going forward, the balance sheet could be further pressured by funding requirements for other regulated capital expenditures, the proposed Maritime Link Transmission Project, a subsea transmission link from Newfoundland to Nova Scotia that is 100% owned by Emera, and Emera’s 29% interest in the transmission link between the island of Newfoundland and Labrador.

Resolution of the Negative trend in the coming months will follow a full assessment of Emera’s plans to reduce its non-consolidated debt to levels commensurate with its current rating and its overall financing strategy on proposed projects in the next five years.

This follows a similar announcement from S&P.

One Response to “EMA.PR.A: DBRS Assigns Negative Trend”

  1. […] 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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