TCL: S&P Says Outlook Negative

Standard & Poor’s has announced:

  • •We are revising our outlook on Montreal-based Transcontinental Inc. to negative from stable.
  • •We base the outlook revision on our view of the ongoing headwinds the company faces in the medium term, with possible declines in both organic revenue and profitability given challenging industry fundamentals.
  • •We are also affirming our ratings on the company, including the ‘BBB’ long-term corporate credit rating.
  • •The negative outlook reflects Standard & Poor’s view that Transcontinental could continue to experience declining organic revenue and margin pressure in the medium term.

Transcontinental’s operating performance was below our expectations in the nine months ended July 31, 2012, with reported revenue and adjusted operating profit declining 2.5% and 15.5%, respectively, on an organic basis, compared with the same period in 2011. We believe that soft economic conditions in the past few years have accelerated the digital substitution of content and advertising from print, which will continue pressuring the company’s print and publishing-related businesses in the medium term.

The negative outlook reflects Standard & Poor’s view that Transcontinental might experience continued declining organic revenue and margin pressure given difficult industry fundamentals. We could lower the ratings if Transcontinental’s operating performance remains soft or if we believe secular risks have increased to an extent that changes our view of the company’s business risk profile or if debt leverage approaches 2.5x. Alternatively, we could revise the outlook to stable if Transcontinental demonstrates sustainable improvement in its operating performance, while maintaining adjusted debt to EBITDA between 1.5x-2.0x.

Transcontinental has a single preferred share issue outstanding: TCL.PR.D, which S&P upgraded to P-3(high) in December 2010. The issue commenced trading October 2, 2009 and is a FixedReset, 6.75%+416. The issue was recently downgraded to Pfd-3 by DBRS.

TCL.PR.D is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

One Response to “TCL: S&P Says Outlook Negative”

  1. […] The previous Negative Outlook on TCL was reported on PrefBlog. […]

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