IGM.PR.B Downgraded to P-2(High) by S&P

Standard & Poor’s has announced:

  • •On Aug. 31, 2017, IGM announced the closing of a minority stake acquisition in China Asset Management Co. Ltd.
  • •We revised the financial risk profile assessment to “modest” from “minimal” because of the increase in debt to fund the transaction combined with lower coverage metrics.
  • •We are lowering our long-term issuer credit rating and unsecured debt ratings on IGM to ‘A’ from ‘A+’ and lowering our preferred stock ratings to ‘BBB+/P-2(high)’ from ‘A-/P-1(low)’. We are also removing these ratings from CreditWatch, where they were placed with negative implications on Dec. 29, 2016.
  • •The stable outlook on IGM reflects our expectation that the company will operate with leverage levels slightly below 1.5x and interest coverage metrics between 9x and 10x during the next 18 to 24 months. It also incorporates our view that investment performance will remain solid and assets under management will grow organically at a modest pace.

The downgrade of IGM reflects the completion of the China Asset Management Co. Ltd. (CAMC) transaction, which was initially announced in December 2016. Through Mackenzie Investments, a subsidiary of IGM, the company acquired a 13.9% stake in CAMC for a purchase price of approximately C$633 million. The acquisition was funded primarily through the issuance of C$600 million in unsecured notes (split in a C$400 million 10-year tranche and a C$200 million 30-year tranche) in January 2017.

The stable outlook reflects S&P Global Ratings’ expectation that IGM will operate with leverage metrics slightly below 1.5x and interest coverage metrics between 9x and 10x during the next 18 to 24 months. The stable outlook also incorporates our expectation that IGM will continue to exhibit positive organic inflows, solid investment performance and sizeable on-balance-sheet investments.

S&P’s Credit Watch Negative was reported on PrefBlog.

IGM.PR.B is a 5.90% Straight Perpetual that commenced trading 2009-12-8 after being announced 2009-11-30. The issue was poorly received and underwriters had to blow out their inventory shortly after opening day.

The issue is tracked by HIMIPref™ and is included in the PerpetualPremium subindex.

4 Responses to “IGM.PR.B Downgraded to P-2(High) by S&P”

  1. skeptical says:

    Not sure if this was covered anywhere else on this blog, but IGM.PR.B was redeemed yesterday. 5.9% post tax vs 4.206 of pre-tax debentures. It’s kind of a no brainer….

    So it seems preferreds really are an expensive line item for lots of companies.

    This makes the second set of issues to be redeemed following the West coast energy issues earlier in March.
    Next in line, IMHO:


  2. jiHymas says:

    Thank you, I missed that … the company wasn’t exactly overwhelming in its public notices!

    I will post the notice tonight.

  3. prefguy says:

    IGM and ENB are different than GWO since in GWO’s preferreds count as regulatory capital I suspect so their not as simple to replace I think. Definitely a good move on IGM’s part replacing IGM.PR.B with a cheaper interest paying denbentures.

  4. skeptical says:

    You are perhaps right prefguy…I’m not too familiar with the regulatory aspect.
    But when the debt market is so much cheaper, it makes sense for lots of these guys to retire expensive capital.

    It’s good that the masses hate the preferred market so much. If we had the ‘normal’ spread levels that James regularly shows in his charts, we’d have lots of these perpetuals yielding 4% or below instead of 5.5%.

Leave a Reply

You must be logged in to post a comment.