WN.PR.A / WN.PR.B / WN.PR.C / WN.PR.D / WN.PR.E : S&P Credit Watch Negative

These issues are currently rated P-2(low) by Standard & Poors, which today placed them on Credit Watch Negative:

At the same time, Standard & Poor’s placed its ratings, including its ‘BBB+’ long-term corporate credit rating, on parent company George Weston Ltd. on CreditWatch with negative implications.
     “The CreditWatch placement reflects the magnitude of challenges faced by Loblaw,” said Standard & Poor’s credit analyst Don Povilaitis. These challenges include substantially lower profitability, supply chain difficulties, significant senior management changes, a new corporate structure which involves substantially reducing the number of employees at head office, and a material goodwill impairment charge.


The ratings on Loblaw and George Weston, which has a 62% equity interest in Loblaw, are linked and jointly influenced by the respective credit profiles. The ratings on the two companies are likely to move in tandem, as Loblaw represents a significant portion of George Weston’s revenues and earnings, and is therefore a key driver of George Weston’s overall performance.

This is due to Loblaw’s announcement of lower earnings and goodwill impairment:

Basic net earnings per common share for the fourth quarter, before taking into account a charge with respect to an expected goodwill impairment, were $0.16 compared to $0.73 in 2005. For the year, basic net earnings per common share, before taking into account a charge with respect to an expected goodwill impairment, were $2.12 compared to $2.72 in 2005.
    The Company has performed its annual goodwill impairment test analysis. Based on this analysis, it is anticipated that the carrying value of the $1.5 billion of goodwill associated with the acquisition of the Provigo business in 1998 is impaired. As a result, the Company expects to record in the fourth quarter an initial estimate of a goodwill impairment charge, which the Company estimates to be in the range of $600 million to $900 million, in its audited consolidated financial statements for the year ended December 30, 2006. This is a non-cash charge that is expected to be finalized and adjusted as necessary in the first half of 2007. This expected charge will result in a negative impact to basic net earnings per common share for the fourth quarter and the full year of $2.19 to $3.28 per share. After the impact of this charge, the Company expects to record a basic net loss per common share in the range of $2.03 to $3.12 in the fourth quarter. For the year, after the impact of this charge, the Company expects a basic net loss per common share in the range of $0.07 to $1.16.

There has as yet been no announcement from DBRS, which rates the issues at Pfd-2(low).

Update, 7:50pm EST DBRS has announced that Weston is “Under Review with Negative Implications”.

9 Responses to “WN.PR.A / WN.PR.B / WN.PR.C / WN.PR.D / WN.PR.E : S&P Credit Watch Negative”

  1. […] A reaction to the Credit-Watch Negative. Now with a pre-tax bid-YTW of 3.40% based on a bid of 26.15 and a softMaturity 2009-6-30. […]

  2. […] A reaction to the http://www.prefblog.com/?p=569″>Credit-Watch Negative. Now with a pre-tax bid-YTW of 3.40% based on a bid of 26.15 and a softMaturity 2009-6-30. […]

  3. […] On credit watch negative. This happened on volume of 12,400 shares, fairly high for this issue. Now with a pre-tax bid-YTW of 5.08% based on a bid of $25.40 and a call 2014-7-31 at $25.00 […]

  4. […] RBC bought 15,000 from CIBC in two tranches at $25.80. Now with a pre-tax bid-YTW of 4.84% based on a bid of $25.83 and a call 2014-10-31 at $25.00. But remember … Credit Watch Negative! […]

  5. […] Still on credit watch negative. Now with a pre-tax bid-YTW of 4.81% based on a bid of 25.08 and a limitMaturity […]

  6. […] Scotia crossed 92,400 at 25.75. Now with a pre-tax bid-YTW of 4.81% based on a bid of 25.73 and a call 2014-10-31 at 25.00. Weston is still under Credit Watch Negative. […]

  7. […] Now with a pre-tax bid-YTW of 4.80% based on a bid of 24.86 and a limitMaturity. Not bad, if the credit stays good! […]

  8. […] Credit Watch Negative! Nesbitt crossed 11,500 at $24.65, CIBC bought 14,500 from Nesbitt at the same price. Now with a pre-tax bid-YTW of 4.88% based on a bid of $24.61 and a limitMaturity. Weston bonds maturing in 2031 are now trading to yield about maybe 5.85% (interest) Make of that what you will. […]

  9. […] Credit watch negative! Scotia crossed 23,300 at $26.05, then Desjardines crossed 20,000 at the same price. Now with a pre-tax bid-YTW of 3.71% based on a bid of $26.00 and softMaturity 2009-6-30 at $25.00. That’s an interest equivalent of 5.19% at standard equivalency … I note that the Weston bonds, 6.45%/11, are trading 44bp back of Canadas, call it maybe 4.50%. […]

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