{"id":16918,"date":"2011-11-04T19:56:08","date_gmt":"2011-11-04T23:56:08","guid":{"rendered":"http:\/\/www.prefblog.com\/?p=16918"},"modified":"2011-11-04T19:56:08","modified_gmt":"2011-11-04T23:56:08","slug":"ron-pr-a-ripe-for-credit-downgrade","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=16918","title":{"rendered":"RON.PR.A: Ripe for Credit Downgrade?"},"content":{"rendered":"<p>DBRS <a href=\"http:\/\/www.dbrs.com\/research\/243220\/dbrs-comments-on-rona-following-debentures-buyback.html\">has commented<\/a>:<\/p>\n<blockquote><p> RONA inc. (RONA or the Company) today announced that it has offered to purchase for cash, by way of two successive offers, up to $200 million of the aggregate principal amount of its 5.40% unsecured debentures due October 20, 2016.<br \/><b>&#8230;<\/b><br \/>On May 11, 2011, DBRS revised RONA\u2019s trend to Negative from Stable. That rating action reflected DBRS\u2019s concern that weak operating performance and a challenging consumer environment may result in RONA\u2019s credit risk profile deteriorating to a level that is no longer consistent with the current rating categories. DBRS\u2019s concern was highlighted by continued weakness in same-store sales growth and the negative impact this was having on operating margins and income. At that time (end of Q1 2011), lease-adjusted debt-to-EBITDAR had increased to 2.82 times (x) from 2.55x a year earlier. DBRS stated that if RONA was successful in implementing a sustainable recovery, including improved operating performance (during the critical summer season, in particular) and prudent capital management that results in a lease-adjusted debt-to-EBITDAR ratio closer to the 2.5x level by the end of the year, it may consider changing the trend to Stable. On the other hand, a lack of improvement in sales, operating income and key credit metrics could result in a downgrade to the ratings before the end of the year.<\/p>\n<p>Since then, RONA released its Q2 2011 results, which delivered same-store sales growth of -9.6%, overall revenue decline of -2.4% and EBITDA of $90 million (versus $133 million year-over-year) as the Company continued to engage in heavy promotional activity to spur growth. This performance resulted in the last 12 months lease-adjusted gross debt-to-EBITDAR of 3.1x.<br \/><b>&#8230;<\/b><br \/>DBRS maintains its view that stabilization will require significant improvement in sales, operating income and significant capital conserving measures \u2013 including prudence with regards to capex, working capital management, dividend payouts, share repurchases and debt-financed acquisitions \u2013 for an extended period. Lack of improvement in sales, operating income, and key credit metrics in the near term could result in a ratings downgrade.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"<p>DBRS has commented: RONA inc. (RONA or the Company) today announced that it has offered to purchase for cash, by way of two successive offers, up to $200 million of the aggregate principal amount of &hellip;<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-16918","post","type-post","status-publish","format-standard","hentry","category-issue-comments"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/16918","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=16918"}],"version-history":[{"count":0,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/16918\/revisions"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=16918"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=16918"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=16918"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}