DBRS Publishes Five Corporate Methodology Updates with Adjusted Format; No Rating Impact

DBRS has today updated five of its corporate finance methodologies, using a revised format that provides a more concise but still detailed insight into the approach that DBRS uses to rate corporate securities in the related industries. DBRS will be updating its other corporate finance methodologies in a similar manner in the future. Today’s methodology updates include the following:

(1) Rating Companies in the Railway Industry (formerly “Rating Companies in the North American Railway Industry”);
(2) Rating Companies in the Forest Products Industry;
(3) Rating Companies in the Industrial Products Industry;
(4) Rating Companies in the Television Broadcasting Industry (formerly “Rating the Television Broadcasting Industry”); and
(5) Rating Companies in the Radio Broadcasting Industry (formerly “Rating the Radio Broadcasting Industry”).

While there have been no rating changes or rating actions caused by today’s methodology updates and the revised format, we note the following high level changes to the methodologies:

(1) Industry risk ratings (IRRs) remain the starting point in the process, but they will no longer make use of the “high” or “low” descriptors. Going forward, the IRR assigned would typically be either in the “A,” or BBB or BB range. DBRS believes using ranges is more realistic given that most industries are typically quite broad in scope. Specifically, for the five methodologies that have been updated today, the new IRRs are as follows:

-- Railway – BBB
-- Forest Products – BB
-- Industrial Products – BBB
-- Television Broadcasting – BB
-- Radio Broadcasting – BB

Previously in the forest products methodology, there was a distinction made in the IRR between, for example, building products, newsprint and packaging; however, no distinction in the IRR is now being made for sub-segments. Therefore, the forest products industry IRR is now BB.

Previously the IRR for radio and television broadcasting was low investment grade; however, because of recent increased competition in these sectors, the new IRRs are BB.

(2) To the extent possible, the key business and financial risk factors will be listed in order of importance. In addition, the FRR metrics used in each methodology are also now more industry specific.

DBRS believes these changes give greater insight into the DBRS corporate finance rating process, but notes that its basic approach has not changed. As a result, no rating actions have arisen from these methodology updates.

For more information on the DBRS corporate rating process, please refer to the section entitled “Overview of the DBRS Rating Process” on page 5 of any of the five new methodologies noted above.