Standard & Poor’s has announced:
- •Boucherville, Que.-based RONA Inc. recently announced that Lowe’s Cos. Inc. (A-/Stable/A-2) has provided guarantees of the obligations under RONA’s preferred shares and debentures outstanding.
- •As a result, we are raising our issue-level rating on RONA’s senior unsecured notes to ‘A-‘ from ‘BBB+’ and our global scale rating on the company’s preferred shares to ‘BBB’ from ‘BBB-‘.
- •At the same time, we are affirming our ‘BBB+’ long-term corporate credit rating on RONA.
- •The stable outlook on RONA reflects our stable outlook on Lowe’s and our expectation that over our two-year outlook horizon, RONA’s stand-alone business and financial risk profiles should be unchanged.
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RONA recently announced that Lowe’s Cos. Inc. (A-/Stable/A-2) has guaranteed RONA’s preferred shares outstanding as well as the company’s 5.4% debentures due Oct. 20, 2016.“We base the upgrade on Lowe’s guarantee of RONA’s preferred shares and debentures outstanding,” said S&P Global Ratings credit analyst Alessio Di Francesco.
In our opinion, this guarantee has enhanced the credit profile of these issues resulting in a one-notch upgrade. Our rating on RONA’s senior unsecured debentures is now equalized with our ‘A-‘ issue-level rating on Lowe’s senior unsecured notes. Our ‘BBB’ global scale rating on RONA’s preferred shares is two notches below our long-term corporate credit rating on Lowe’s (guarantor). The notching incorporates our view that the preferred shares have an optional deferral feature and are subordinated to Lowe’s debt outstanding.
The guarantee by Lowe’s has been previously reported on PrefBlog. DBRS has discontinued its rating of RONA, so the S&P rating is the only one available. S&P previously rated the issues P-2(low) following the closing of the takeover via Plan of Arrangement on May 20. RONA’s preferred shareholders turned down a $20 cash offer that was part of the plan. Since March 31, the TXPR total return index has returned +5.42%, while RON.PR.A is up 3.75% from the $20 offer.
Does it matter that the new owner is US based? Is there a withholding tax?
Does it matter that the new owner is US based? Is there a withholding tax?
To the best of my knowledge, the answer to both questions is no. There are many preferred shares of Canadian branch plants trading on the market; the one that first comes to mind is W (Westcoast Energy, a subsidiary of Spectrum).
However, this is the sort of question that is better directed to the investor relations department of the company concerned.