DBRS Confirms Ratings of First National Financial at BBB and Pfd-3, Stable Trends

DBRS has today confirmed the Senior Secured – Guaranteed Debt and Class A Preference Shares ratings of First National Financial Corporation (FNFC) at BBB and Pfd-3, respectively, and the Issuer Rating of First National Financial LP (FNFLP) at BBB; all trends remain Stable.

The ratings and trends reflect FNFC’s status as Canada’s largest non-bank mortgage originator, with just over $75 billion in mortgages under administration as of December 31, 2013; its strong asset quality profile, with all assets secured by real estate and a substantial portion insured; and its high-quality, low-cost servicing capabilities. Challenges to FNFC’s ratings include the diversity of the overall funding mix, a high reliance on wholesale funding, a high dividend payout ratio that limits financial flexibility and limited oversight from regulators.

The rating on FNFC’s Senior Secured – Guaranteed Debt is based on a senior guarantee from FNFLP and an Intercreditor Agreement between Computershare Trust Company of Canada as the debenture trustee and the lenders under a credit facility. The Intercreditor Agreement ranks the indebtedness created under the debentures equally and rateably with the indebtedness created under FNFLP’s credit facility.

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 methodologies are Global Methodology for Rating Banks and Banking Organisations and Preferred Share and Hybrid Criteria for Corporate Issuers (Excluding Financial Institutions), which can be found on our website under Methodologies. In applying these methodologies, DBRS has allowed for the fact that the credit in question is not a bank.

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