TCL Downgraded by S&P to P-3

Standard and Poor’s has announced:

  • •We are lowering our long-term corporate credit rating on Montreal-based Transcontinental Inc. to ‘BBB-‘ from ‘BBB’.
  • •We base the downgrade on our view of challenging industry fundamentals, whereby the company could continue to experience declines in organic revenue and profitability, absent gains from the Quad/Graphics Canada transaction, prompting our revision of the company’s business risk profile to “fair” from “satisfactory.”
  • •The stable outlook reflects Standard & Poor’s expectation that Transcontinental’s financial policy will be moderate, operating performance will be good despite secular pressures, free cash flow will remain healthy, and credit measures will be managed in line with our expectations in the medium term, including adjusted debt to EBITDA in the 2x area.

We could lower the ratings if Transcontinental’s operating performance deteriorates, if it does not achieve our revenue targets, if margins decline, or if debt leverage exceeds 2.5x. Given challenging industry conditions, Standard & Poor’s is not contemplating raising the ratings in the next year. However, we could raise the ratings on Transcontinental in the medium term if the company improves its market position in growing sectors, while strengthening its operating performance and credit protection measures on a sustainable basis.

The previous Negative Outlook on TCL was reported on PrefBlog.

TCL has a single issue outstanding, TCL.PR.D, which is tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

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