DBRS Places Newalta Corporation’s Ratings Under Review with Developing Implications

DBRS Limited (DBRS) placed the Issuer Rating of CCC (high) and Unsecured Notes (the Notes) rating of CCC (low) of Newalta Corporation (Newalta or the Company) Under Review with Developing Implications. In accordance with DBRS’s policy for ratings placed under review, the Positive trend on Newalta’s ratings has been suspended. The Under Review with Developing Implications status follows Newalta’s announcement of an agreement to merge with Tervita Corporation (Tervita) by way of a share exchange in which Newalta shareholders will own 11% of the new company.

By placing the ratings Under Review with Developing Implications, DBRS signals that (1) Tervita is expected to repay Newalta’s $125 million notes and $150 million notes maturing in 2019 and 2021, respectively, which together make up the Notes, using Tervita’s fully committed bridge financing and (2) the merger is expected to close late in the second quarter or early in the third quarter of 2018. The Notes contain a change-of-control clause in the Indenture that gives bondholders the right to require the Company to repay the Notes.

On November 2, 2017, DBRS had changed Newalta’s trends to Positive from Stable, reflecting (1) the recent moderately positive operating results consistent with DBRS’s expectations of improved performance and (2) business and financial risk profiles that exceed levels commensurate with the current ratings.

Going forward, DBRS will review the progress of the merger and financing arrangement as more details become available while continuing to review Newalta’s operating results and overall financial metrics. Assuming completion of the merger and repayment of the Notes, DBRS would withdraw the rating on the Notes. Conversely, DBRS would keep Newalta’s ratings in the event that the merger does not materialize and Newalta continues to operate as a stand-alone company.

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

The principal methodologies are Rating Companies in the Services Industry and DBRS Criteria: Recovery Ratings for Non-Investment Grade Corporate Issuers, which can be found on dbrs.com under Methodologies.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrs.com.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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