DBRS Morningstar Assigns Rating of BBB, Stable, to Sienna Senior Living Inc.’s Series C Senior Unsecured Debentures

DBRS Limited (DBRS Morningstar) assigned a rating of BBB with a Stable trend to Sienna Senior Living Inc.’s (Sienna) $125 million Series C Senior Unsecured Debentures (Series C Debentures) due March 31, 2027. The rating on the Series C Debentures is based upon the rating on the already-outstanding series of Senior Unsecured Debentures.

The Series C Debentures are direct unsecured obligations of Sienna and rank equally and rateably with all other present and future unsecured and unsubordinated indebtedness of Sienna. DBRS Morningstar understands that Sienna will use the net proceeds of the offering to repay existing indebtedness and for general corporate purposes.

As the duration of the Coronavirus Disease (COVID-19) pandemic has continued longer than was anticipated at the time of the last review in September 2020, this has contributed to a notable decline in EBITDA, driven by greater deterioration in the retirement segment relative to the long-term care (LTC) segment. Importantly, provincial governments (Ontario and British Columbia) continue to provide significant funding support to LTC operators such that the majority of extraordinary pandemic expenses and lost revenues, due to lower occupancy, are expected to be recovered, albeit with a one- or two-quarter lag. Furthermore, while the ultimate pace of recovery in retirement occupancy remains uncertain, DBRS Morningstar believes that the long-term fundamentals remain intact.

Supported by the high vaccination rate of residents and staff, along with the gradual relaxation of public health measures, DBRS Morningstar has increased confidence that Sienna's Q1 2021 results likely reflect the nadir of the pandemic-related deterioration in its financial metrics and anticipates a gradual recovery in the coming quarters.

ESG CONSIDERATIONS
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 Canadian Long-Term Care Industry (September 9, 2020; https://www.dbrsmorningstar.com/research/366501), Rating Entities in the Real Estate Industry (April 23, 2021; https://www.dbrsmorningstar.com/research/377358), and DBRS Morningstar Criteria: Rating Corporate Holding Companies and Parent/Subsidiary Rating Relationships (November 2, 2020; https://www.dbrsmorningstar.com/research/369167), which can be found on dbrsmorningstar.com under Methodologies & Criteria. The composite rating for the Company is arrived at using a 60 (LTC):40 (retirement) contribution of the two businesses, based on DBRS Morningstar’s projections for EBITDA over the medium term. 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).

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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