PrefBlog

DBRS has announced that it:

downgraded its rating on Canaccord Genuity Group Inc.’s (CF or the Company) Cumulative Preferred Shares to Pfd-4 (high) from Pfd-3 (low) and maintained the trend at Negative. The Company has a Support Assessment of SA3, which implies no expected systemic support.

The rating downgrade recognizes the considerable headwinds facing all nonbank financial institutions, particularly those with more limited or weaker business models that lack the breadth and scale to overcome significant near-term challenges. CF is a Canadian-based financial institution with $4.5 billion in assets as of Q3 2020, operating in the U.S., the United Kingdom (UK), and Australia, with a focus on capital markets activities and wealth management. Given the abruptness and severity of the economic contraction caused by the Coronavirus Disease (COVID-19), combined with uncertainty about the magnitude or duration of the downturn, DBRS Morningstar has concerns about potential impact on the Company’s capital markets businesses. DBRS Morningstar sees near-term challenges for participants in the capital markets as significant, with potential issues including reduced investment banking volumes, asset value declines, unmet margin calls/collateral liquidation at lower prices, illiquid assets stalled on the balance sheet, and limited market access for funding, all of which could adversely affect the financials of firms such as CF in DBRS Morningstar’s opinion. Additionally, while CF’s trading businesses will likely benefit from the significant market volatility, the magnitude of these revenues will likely be insufficient to offset the other notable headwinds.

In maintaining the Negative trend, DBRS Morningstar notes the leverage utilized in recent wealth management and other acquisitions in Canada, the U.S., the UK, and Australia where CF expected the combined businesses’ success and efficiencies to drive profits and reduce leverage over time. With unsupportive revenue headwinds in wealth management, DBRS Morningstar remains concerned that the impact of the coronavirus-related downturn could impede CF’s ability to comfortably meet contractual payments.

Affected issues are CF.PR.A and CF.PR.C

This entry was posted on Friday, April 17th, 2020 at 11:36 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.