EMP.PR.B Downgraded to Pfd-4(high) by DBRS

DBRS has announced that it:

has today downgraded the long-term debt rating of Empire Company Ltd. (Empire or the Company) to BB (high) from BBB, the Preferred Share rating to Pfd-4 (high) from Pfd-3, and discontinued the short-term rating. The trends remain Negative for the long-term and Preferred Shares ratings.

DBRS placed Empire’s ratings Under Review with Negative Implications on April 27, 2007 following the announcement that Empire and Sobeys Inc. (Sobeys or the Company) had entered into an agreement by which Empire would acquire all of the outstanding common shares of Sobeys that it did not already own for approximately $1.06 billion. Empire previously owned 72.1% of the issued and outstanding shares of Sobeys.

The significant increase in financial leverage, combined with a weaker profitability at Sobeys, has led to DBRS’s two-notch reduction in long-term ratings. The negative trend reflects the challenges involved with reversing the declining profitability and cash flow at Sobeys. DBRS is also concerned with the high level of budgeted capex and/or additional acquisitions that could result in further increases to debt for the consolidated group.

EMP.PR.B is a tiny little issue with 331,900 shares outstanding, total par value $8.3 million, according to the 2006 Annual Report. They pay 75% of prime. The TSX indicates a listing date of July 9, 1982, which illustrates one of my hobby-horses: with floaters you get short-term rates and long-term credit risk.

This issue is not, has not been, and will not be tracked by HIMIPref™ – too small!

One Response to “EMP.PR.B Downgraded to Pfd-4(high) by DBRS”

  1. […] was last mentioned on PrefBlog when it was downgraded to Pfd-4(high) by DBRS. DBRS discontinued the rating in February […]

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