Standard & Poor’s has announced:
- •Mooresville, N.C.-based home improvement retailer Lowe’s Cos. Inc. has completed its previously announced acquisition of Quebec-based RONA Inc. for about C$3.2 billion.
- •As a result, we are raising our long-term corporate credit rating on RONA to ‘BBB+’ from ‘BB+’ and removing the company from CreditWatch, where we had placed it with positive implications Feb. 3, 2016. The outlook is stable.
- •At the same time, we are raising our issue-level rating on RONA’s senior unsecured notes to ‘BBB+’ from ‘BB+’ and our rating on its preferred shares to ‘BBB-‘ from ‘B+’.
…
“In our opinion, RONA’s operations are important to Lowe’s long-term growth strategy,” said S&P Global Ratings credit analyst Alessio Di Francesco. As such, we believe Lowe’s is unlikely to sell RONA and we expect that Lowe’s would likely provide additional liquidity, capital, or risk transfer in most foreseeable circumstances. We believe the 496 stores and nine distribution centers Lowe’s acquired from RONA should improve the competitive position of its Canadian business by increasing its scale and effectively taking out a competitor. Prior to completing this acquisition, Lowe’s had only 42 stores in Canada. Furthermore, RONA offers Lowe’s an important entry into Quebec (almost 25% of the Canadian home improvement market) where Lowe’s previously had no presence.
RON.PR.A and RON.PR.B were last mentioned on PrefBlog when the effective date of the Plan of Arrangement was announced.
DBRS has not yet resolved its Review-Positive of RONA, which was announced when the plan of arrangement was proposed.
Looks good for the outstanding preferred shares?
A good credit rating is already reflected in the price; they’d be in the low teens – at best – without Lowe’s financial backing.