DBRS Rates RONA’s New Preferred Share Issue at Pfd-3

DBRS has today assigned a new rating of Pfd-3 with a Stable trend to the new five million Cumulative Five-Year Rate Reset Series 6 Class A Preferred Shares (Preferred Shares) of RONA inc. (RONA or the Company) for total proceeds of $125 million.

The Series A Preferred Shares will rank in priority to the Company’s common shares as to the payment of dividends and the distribution of assets on dissolution, liquidation or winding-up.

The $125 million Preferred Share issue does not have a significant impact on DBRS’s view of RONA’s financial profile, given the relatively small size of the issue (i.e., as at September 30, 2010 RONA’s total lease-adjusted debt was approximately $1.2 billion, and book equity was approximately $1.9 billion). In addition, the Preferred Share dividend does not have a material impact on coverage ratios, as the fixed charge equates to only approximately $6.5 million per year (compared to the last 12-months ended September 30, 2010 EBITDAR of $498 million, rent expense of approximately $143 million and interest expense of $23 million).

The net proceeds from this offering will be used by RONA to reduce indebtedness, contribute to the funding of future strategic acquisitions, capital projects and for general corporate purposes.

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

The applicable methodology is Rating Merchandisers, which can be found on the DBRS website under Methodologies.