DBRS Confirms BBB (low) and Pfd-3 (low) Ratings on Dundee Corporation

DBRS has today confirmed its ratings of the Senior Unsecured Debentures and Cumulative Redeemable First Preferred Shares of Dundee Corporation (Dundee or the Company) at BBB (low) and Pfd-3 (low), respectively. The trends remain Stable.

The rating confirmation reflects the stable market position and conservative capitalization of the Company’s major asset, its 54% interest in DundeeWealth Inc. (DW). (See separate report). The investment in DW, representing 50% of the Company’s gross asset value is complemented by diversified investments in real estate and resources that have been benefiting from recent strong markets for energy, metals and real estate.

DW’s integrated manufacturing and distribution strategy has been developed through a series of acquisitions, which has forced the Company to incur additional integration expenses. Product development and marketing expenses have also increased as DW attempts to deepen relationships with its 1,800 financial and third-party advisors in order to maintain an increasing share of the market for assets under management (AUM). Through strong net sales and buoyant capital markets, AUM growth at DW has been healthy, providing a stable core to Company revenues and earnings.

The Company’s liquidity profile is good following the earlier restructuring of certain real estate and resource investments into publicly traded entities. These holdings provide additional sources of financial flexibility to the Company. Capitalization is increasingly conservative, with debt having being replaced by Preferred Shares at the holding company level in 2006. Using market values of the Company’s investments, debt and preferred-share obligations are covered seven times. No dividends are paid to common shareholders, which also supports the Company’s financial flexibility.

Beyond wealth-management operations, the Company’s chosen exposures to real estate and commodity prices, while currently favourable for the Company’s financial performance, are a potential source of income volatility.

Note:
All figures are in Canadian dollars unless otherwise noted.