DBRS Assigns AAA Provisional Rating to USD Senior Notes Issue of CDP Financial Inc.

DBRS has today assigned a provisional rating to CDP Financial Inc.’s proposed USD Senior Notes (the Notes) issue of AAA with a Stable trend. The Notes will be unconditionally and irrevocably guaranteed by the Caisse de dépôt et placement du Québec (the Caisse or the Fund) and will rank pari passu with all other unsecured and unsubordinated indebtedness of CDP Financial Inc.

CDP Financial Inc. is the financing subsidiary of the Caisse. Net proceeds will be used to repay notes maturing in 2014.

Even with the proposed notes issue, DBRS expects recourse debt to remain well below the Fund’s internal debt limit of 10% of adjusted net assets, which provides considerable resilience to the assigned provisional rating. As at year-end 2013, the Fund’s recourse leverage remained manageable, with recourse debt at 4.7% of adjusted net assets, which is consistent with that of other DBRS-rated pension fund managers. DBRS notes that, as an exclusive asset manager, the Caisse has no direct responsibility for the obligations faced by the depositors in relation to the benefits owed to its members, which greatly reduces the volatility of the Caisse’s net asset position.

The Fund delivered another solid total portfolio return of 13.1% in 2013, up from 9.6% in 2012, driven by strong equity market performance, which more than offset weak fixed income performance owing to a rise in long-term bond yields in the latter half of the year, and slowing emerging market growth. The year’s net investment return exceeded the benchmark by 50 basis points. Over a four-year period, the Fund has delivered a 10.0% weighted-average return, surpassing its benchmark, which returned 8.8% over the same period. Sizable investment gains and net contribution inflows helped drive a 13.6% increase in net assets to $200.1 billion as at December 31, 2013, allowing for greater portfolio and risk diversification.

Liquidity remains sizable and more than sufficient to meet short-term obligations. Highly liquid assets, as measured by DBRS, remain above $44 billion, and well in excess of the DBRS requirement of 1.5 times CDP Financial Inc.’s commercial paper program limit.

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 Rating Canadian Public Pension Funds & Related Exclusive Asset Managers (May 2014) and DBRS Criteria: Guarantees and Other Forms of Explicit Support (July 2013), which can be found on our website under Methodologies.

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

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