S&P Global Ratings on Aug. 28 affirmed the ratings of Loblaw Cos. Ltd. and its parent company, George Weston Ltd., citing Loblaw's expected steady profitability over the next two years.
The rating agency revised its downgrade leverage threshold on Loblaw to 3.25x from 3.0x and on George Weston to 3.75x from 3.5x. Ratings also updated its upgrade leverage threshold on Loblaw to 2.25x from 2x and on George Weston to 3.25x from 3x.
Both Loblaw and George Weston were assigned a stable outlook to reflect the agency's expectation that George Weston's consolidated adjusted debt-to-EBITDA will be in the low-to-mid-3x area, supported by Loblaw's steady profitability.
Ratings said it continues to expect Loblaw to generate funds from operations-to-debt of 25% to 30% in 2019 and 2020, and for George Weston to record funds from operations-to-debt of 15% to 20% in 2019 and 2020.
It also expects Loblaw to continue to operate efficiently and protect margins amid the increased competition from existing and new players in the food retail market.
Ratings said it could lower its ratings on Loblaw within the next two years if it lowers its issuer credit rating on George Weston. A downgrade at George Weston could be triggered if the group's consolidated adjusted debt-to-EBITDA deteriorates to above 3.75x, with poor prospects for improvement over a two-year period.
Conversely, Ratings said it could raise the ratings on both companies if George Weston sustains a consolidated adjusted debt-to-EBITDA ratio below 3.25x.
This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings. Descriptions in this news article were not prepared by S&P Global Ratings.
