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S&P affirms George Weston's rating at BBB with stable outlook

S&P Global Ratings on Sept. 5 said George Weston Ltd.'s ratings are not affected by the announced spinout of Choice Properties Real Estate Investment Trust from its subsidiary Loblaw Cos. Ltd., which will result in George Weston directly owning a majority stake in the REIT.

The rating agency kept the Canadian food company's issuer credit rating at BBB, saying its assessments of George Weston's business and financial risk profiles remain unchanged after the announced transaction.

The rating remains stable. S&P also affirmed its issue-level ratings on the company's unsecured debt at BBB and its BB+ global scale and P-3 Canada scale ratings on George Weston's preferred stock.

Following the spinoff, George Weston will own 65.4% of Choice REIT, and the two companies' financial statements will be consolidated. It will also own 50% of Loblaw.

The rating agency expects that Loblaw will generate about 80% of George Weston's consolidated EBITDA, Choice REIT will account for 14% and George Weston's bakery unit, Weston Foods (Canada) Inc., will make up the remainder.

S&P said it could raise its ratings on George Weston over the next two years if the company is likely to sustain a consolidated adjusted debt-to-EBITDA ratio below 3x and if it demonstrates a willingness to maintain leverage at that level.

The agency, however, said it does not expect any improvement in credit metrics in the near term because of its expectation of leverage at the REIT level.

S&P said its view of George Weston's business profile will still be primarily driven by Loblaw's credit characteristics. Shortly after releasing its affirmation on George Weston's rating, S&P also affirmed Loblaw's issuer credit rating at BBB, citing its expectation that Loblaw is highly unlikely to be sold.

This S&P Global Market Intelligence news article may contain information about credit ratings issued by S&P Global Ratings, a separately managed division of S&P Global. Descriptions in this news article were not prepared by S&P Global Ratings. The original S&P Global Ratings documents referred to in this news brief can be found here.