DBRS Morningstar Downgrades CanWel’s Senior Unsecured Notes to B from B (high), Confirms Issuer Rating at B (high), Trends Stable

DBRS Limited (DBRS Morningstar) downgraded CanWel Building Materials Group Ltd.’s (CanWel or the Company) Senior Unsecured Notes (the Notes) to B from B (high) and confirmed the Issuer Rating at B (high). All trends are Stable. The downgrade of the Notes reflects the addition of new Senior Unsecured Notes (the New Notes) of up to $300 million, due May 2026, which caused a downgrade to the Recovery Rating to RR5 from RR4 and in turn led to a one-notch downgrade on the Notes, in accordance with “DBRS Morningstar Criteria: Recovery Ratings for Non-Investment-Grade Corporate Issuers.”

The confirmation of the Issuer Rating reflects DBRS Morningstar’s expectation that the Company will apply the net proceeds from the New Notes to pay down the Company’s outstanding debts under the secured revolving loan facility or other indebtedness and, as such, credit metrics immediately following the new issuance are not expected to change.

The New Notes will rank equal in right of payment with any existing and future senior unsecured indebtedness, senior in right of payment to any future subordinated indebtedness, and effectively junior to any existing and future secured indebtedness of the Company, including indebtedness under the current revolving facility, to the extent of the value of the assets securing such indebtedness.

The obligations of the Company under the New Notes will be fully and unconditionally guaranteed on a senior unsecured basis by each of CanWel’s restricted subsidiaries.

The rating being assigned to the New Notes is based upon the rating of an already-outstanding series of the above-mentioned debt instrument and information provided to DBRS Morningstar by the Company and its agents as at the date of this press release.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/373262.

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

The principal methodologies are Rating Companies in the Merchandising Industry (July 30, 2020; https://www.dbrsmorningstar.com/research/364692), Rating Companies in the Forest Products Industry including Appendix I – Timberland Operators (March 16, 2021; https://www.dbrsmorningstar.com/research/375290), and DBRS Morningstar Criteria: Recovery Ratings for Non-Investment-Grade Corporate Issuers (August 24, 2020; https://www.dbrsmorningstar.com/research/366063), which can be found on dbrsmorningstar.com under Methodologies & Criteria. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (February 3, 2021; https://www.dbrsmorningstar.com/research/373262).

For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.

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@dbrsmorningstar.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.

Generally, the conditions that lead to the assignment of a Negative or Positive trend are resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

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

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