GMP.PR.B & GMP.PR.C : Still on Review-Developing at DBRS

DBRS has announced that it:

maintained the Under Review with Developing Implications status on GMP Capital Inc.’s (GMP or the Company) Cumulative Preferred Shares rating of Pfd-4 (high).

DBRS Morningstar once again maintained the Under Review with Developing Implications status on March 17, 2020, as GMP had called a special meeting of common shareholders on April 21, 2020, to approve the consolidation.

However, in light of concerns over the Coronavirus Disease (COVID-19), GMP postponed the special meeting. All three of Richardson GMP’s shareholder groups (GMP, RFGL, and two elected investment advisor representatives on the board of RGMP) agreed to extend the contractual negotiation period between GMP and RFGL. This agreement was set to occur on April 16, 2020, and has been extended until 60 days following the date that the Declaration of Emergency ordered by the Lieutenant Governor of Ontario has been withdrawn or terminated by the Government of Ontario. In the interim, the parties involved (GMP, RFGL, and the Richardson GMP investment advisors) continue to work toward entering into a definitive agreement, but without any assurances about the outcome of these discussions.

Under the terms of the proposed transaction, GMP will acquire all common shares of Richardson GMP that it does not already own (65.5% stake). The DBRS Morningstar-rated Cumulative Preferred Shares would remain with the consolidated entity.

While DBRS Morningstar would ideally like to resolve this Under Review with Developing Implications status as quickly as possible, the ratings implications for GMP remain unclear. The continued Under Review period considers that the consolidation of GMP with Richardson GMP has yet to be finalized. DBRS Morningstar will assess GMP’s pro forma structure once it consolidates full ownership of Richardson GMP. This assessment will review the Company’s assets and liabilities composition, ownership, future strategic direction, and management’s ability to execute on this plan. If the consolidation were not to occur, DBRS Morningstar would need to assess GMP’s standalone intrinsic strength, including its credit fundamentals, prospects for growth, and ability to maintain debt service payments on its Cumulative Preferred Shares.

The Review was last extended in March, 2020.

Affected issues are GMP.PR.B and GMP.PR.C.

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