DBRS Morningstar Confirms Leisureworld at A (low), Stable, Using New Long-Term Care Methodology

DBRS Limited (DBRS Morningstar) confirmed the Series B Senior Secured Debentures rating of Leisureworld Senior Care LP (Leisureworld) at A (low) with a Stable trend. The confirmation follows the finalization of DBRS Morningstar’s “Rating Companies in the Canadian Long-Term Care Industry” methodology (the Long-Term Care (LTC) Methodology) on October 8, 2019. Concurrently, DBRS discontinued Leisureworld’s Issuer Rating, as the LTC Methodology does not use Issuer Ratings.

Leisureworld was previously rated using the “General Corporate Methodology” (Appendix 2: Leisureworld Senior Care LP), which will be archived shortly.

The rating reflects Leisureworld’s position as a leading provider of LTC in the Province of Ontario (Ontario; rated AA (low) with a Stable trend by DBRS Morningstar), high-quality portfolio of LTC homes, stable and predictable LTC funding, strong track record of adhering to strict regulatory requirements and lack of prior-ranking debt in the capital structure. The rating is constrained by the limited ability to grow revenues in LTC and Leisureworld’s geographic concentration in Ontario.

Leisureworld’s key financial metrics remain strong for the rating. For last 12 months ended June 30, 2019, debt-to-adjusted EBITDA was 5.1 times (x) and EBITDA interest coverage was 5.3x. DBRS Morningstar expects financial metrics to continue improving modestly with debt-to-adjusted EBITDA averaging 4.6x and EBITDA interest coverage averaging 5.4x through 2019 and 2020. These projections are based on expectations for modest growth in EBITDA, mandatory contributions to the the Series B Senior Secured Debentures’ principal reserve fund and stable interest costs.

RATING DRIVERS
A negative rating action could arise if Leisureworld’s key financial metrics deteriorate significantly on a sustained basis. A positive rating action could arise from a material improvement in size and scale resulting in improved market position and geographic diversification.

Notes:
The principal methodology is Rating Companies in the Canadian Long-Term Care Industry, which can be found on dbrs.com under Methodologies & Criteria.

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 Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada