DBRS Confirms the Caisse at AAA and CDP Financial Inc. at AAA and R-1 (high)

DBRS Limited (DBRS) has today confirmed the Issuer Rating of the Caisse de dépôt et placement du Québec (the Caisse) at AAA. The Issuer Rating was assigned by DBRS on September 14, 2012, as part of a broad initiative on investment-grade corporate ratings, and replaces the Caisse’s Counterparty Rating, which is being discontinued. DBRS has also confirmed CDP Financial Inc.’s Long-Term Debt and Commercial Paper ratings at AAA and R-1 (high), respectively, based on the unconditional guarantee provided by the Caisse. The trends on all ratings remain Stable, underpinned by the Caisse’s exclusive investment mandates with its largest depositors, its low recourse debt burden and substantial liquidity position and asset base under management.

As expected by DBRS, investment conditions have remained challenging since last year’s rating review. The Caisse ended 2011 with total returns of 4.0%, or 26 basis points below the benchmark portfolio, and the overall return recorded for the first six months of 2012 amounted to 3.5% as a result of difficult equity markets. Nonetheless, net assets remain substantial, at $165.7 billion at June 30, 2012, while recourse stood at a relatively low 5.5% of adjusted net assets by year-end 2011, with no material change anticipated for the rest of the year.

The European sovereign debt concerns, the fragile U.S. economic recovery and volatile consumer confidence may continue to dampen equity markets into 2013. The Caisse is expected to remain focused on simpler instruments and long-term strategies, with a sustained focus on non-traditional investments, emerging markets and on investment opportunities in Québec, where it has a natural advantage. The Caisse has no plans to increase recourse debt over the near term. Although accessing the debt market on an opportunistic basis remains a possibility if a large investment opportunity arises, recourse debt would be expected to remain below the limit of 10% of net adjusted assets, maintaining considerable resilience in the financial profile. Somewhat concerning, however, are the indications from the recently-elected Parti Québécois government during its campaign that, if elected, it may seek to broaden the Caisse’s mandate to further focus on Québec’s development. While to date the government has not followed through on its campaign commitment, independence is an important pillar of the Caisse’s strong credit profile and any attempt to materially erode this independence could have adverse effects on the credit profile.

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

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 to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodology is Canadian Public Pension Funds & Related Exclusive Asset Managers (May 2012), which can be found on our website under Methodologies.

This rating is endorsed by DBRS Ratings Limited for use in the European Union.