PrefBlog

Following the S&P downgrade, the DBRS downgrade of Loblaw and the Weston Credit Watch Negative by DBRS, DBRS has announced that it:

today downgraded the long-term ratings of George Weston Limited (Weston or the Company). The Notes and Debentures have been downgraded to BBB (high), the Exchangeable Debentures to BBB and the Preferred Shares to Pfd-3 (high), all with a Stable trend. At the same time, DBRS has confirmed the short-term rating of Weston at R-1 (low), but revised the trend to Negative.

…

Although management of Loblaw and Weston are separate, and there is no cross-default or cross collateralization covenants on the respective debt, Weston’s ratings reflect the investment in Loblaw, as it is a significant portion of the group’s consolidated operations. Weston’s long-term rating has historically been notched lower to reflect Weston’s own financial profile and the implicit structural subordination, given Loblaw’s minority public float.

Weston’s rating also reflects the underlying, albeit lower, credit rating of the bakery business. For the past few years, the bakery operations have stabilized/improved enough to limit further declines in the long-term rating, leading to the Stable trend. As such, any further deterioration in Loblaw’s long-term rating would not necessarily affect the long-term rating of Weston – i.e., ratings could potentially be the same.

Weston has the following preferred issues trading on the TSX: WN.PR.A WN.PR.B WN.PR.C WN.PR.D & WN.PR.E. All except WN.PR.B are fixed-rate perpetual; WN.PR.B is retractible.

This entry was posted on Tuesday, May 22nd, 2007 at 3:34 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.