Standard & Poor’s has announced:
- •Toronto-based information services company Thomson Reuters Corp. completed the sale of its Financial & Risk (F&R) business, selling a controlling 55% equity interest to Blackstone Group alongside affiliates of Canada Pension Plan and GIC).
- •We view the divesture of the F&R business, which accounted for more than half of Thomson Reuters’ consolidated revenue and EBITDA in 2017, as a loss of the scale and diversification benefits that we previously factored into our rating.
- •We are lowering our issuer credit rating on Thomson Reuters and our senior unsecured issue-level ratings by one notch to ‘BBB’ from ‘BBB+’. We affirmed our ‘A-2’ short-term commercial paper rating.
- •The stable outlook reflects our expectation for modest organic revenue growth in the low- to mid-single-digit percentage range, EBITDA margins steadily rise to the mid-20% over the next two years as the company reduces costs and improves its operating efficiency, and that the company will maintain adjusted debt to EBITDA leverage below 3x.
NEW YORK (S&P Global Ratings) Oct. 4, 2018–S&P Global Ratings today lowered its long-term issuer credit rating on Toronto-based information services company Thomson Reuters Corp. to ‘BBB’ from ‘BBB+’ and affirmed its ‘A-2’ short-term issuer credit rating. The rating outlook is stable. We also lowered the issue-level ratings on the company’s senior unsecured debt to ‘BBB’ from ‘BBB+’. We removed the ratings from CreditWatch negative, where we placed them n Jan. 31, 2018, following the company’s announcement of the sale of majority stake in its F&R business.
We also lowered our Canadian scale preferred share rating to ‘P-3(High)’ from ‘P-2(Low)’, lowered our preferred share issue rating to ‘BB+’ from ‘BBB-‘ and affirmed our ‘A-2′ short-term rating on the company’s U.S. commercial paper facility.
The downgrade reflects the divesture of the F&R business, which accounted for more than half of Thomson Reuters’ consolidated revenue and EBITDA in 2017. As a result of this sale, we believe the company is losing the scale and diversification benefits that we previously factored into our rating.
As reported on PrefBlog, S&P placed TRI on Watch-Negative in January, 2018. DBRS downgraded the issue to Pfd-3(high) in October 2013.
The sole affected issue is TRI.PR.B
Despite the (sole) TRI preferred, TRI.PR.B, being rated a notch below BAM preferred issues, TRI.PR.B consistently trades at about an 7% premium to its counterparts BAM.PR.K, BAM.PR.B and BAM.PR.C. This is all the more surprising given that the TRI.PR.B dividend is based on 70% of Canada Prime vs. 72% for the aforementioned three BAM issues.
Do you have an explanation for this? Is it just because fund managers are looking for diversification away from BAM?
Thanks!
TRI.PR.B consistently trades at about an 7% premium to its counterparts BAM.PR.K, BAM.PR.B and BAM.PR.C
Yes. This, together with the slightly lower dividend rate, leads to a significantly lower yield, about 5.50% compared to about 6.00% for the BAM issues.
Do you have an explanation for this?
Not really!
Is it just because fund managers are looking for diversification away from BAM?
That’s quite plausible and consistent with the excess yields usually available on BAM issues of other types. In this case there’s also the ‘push’ of diversification into TRI … if, as part of your campaign to own as many different names in as many different sectors as possible, then TRI.PR.B is the only TRI preferred share issue trading.
Hi James,
Today is the record date for TRI.PR.B . The TRI website has (finally!) provided the quarterly dividend: 0.106602. However, presuming the prime rate to be 2.45%, I calculate that the quarterly dividend should be 0.7 x 2.45% x 25 / 4 = 0.1071875.
Are there some small fluctuations of the prime rate which can occur, or have they just made an “error” ?
From the website, we see the paydate for the prior dividend was March 31, and it’s June 30 for the next one.
Thirty days in April, 31 in May and 30 in June = 91 days. Note that 2020 is a leap year, 366 days.
0.7 * 2.45% * 25 * 91 / 366 = 0.106602.
Not too many shares pay with a day count (other than for the first dividend), but this is an extremely old issue!
Wow, thanks! I thought that I’d unearthed a nefarious fraud !