DBRS Downgrades Armtec Holdings Limited; Ratings Remain Under Review with Negative Implications

DBRS Limited (DBRS) has today downgraded the Issuer Rating of Armtec Holdings Limited (Armtec or the Company) to B (low) from B and its Senior Unsecured Debt Rating to CCC (high) from B (low), with both ratings remaining Under Review with Negative Implications. The rating actions follow Armtec’s press release, which indicated that the Company is continuing to review its strategic alternatives related to the pending expiry of a covenant waiver and short-term credit facility on February 27, 2015. The Company previously obtained the waiver and the credit facility from its creditors on October 31, 2014.

The rating actions reflect that the risk of a potential default by the Company has materially increased. Although Armtec indicated in its press release that the work with its lenders and advisors is continuing and an agreement is still possible before the February 27, 2015, expiry date, the imminence of the expiry date and the absence of an agreement thus far increase the risk of a potential default. DBRS is maintaining the revised ratings Under Review with Negative Implications and will assess the eventual outcome of Armtec’s review of its strategic alternatives and the agreement, if any, that Armtec may enter with its lenders.

DBRS maintains the view that Armtec’s operating cash flows may not be adequate to support its current high debt level in its capital structure, especially in light of the prevailing challenging market conditions, which include competitive pressure in Western Canada, slow demand growth in most key markets and exposure to adverse weather conditions. Hence, DBRS believes that Armtec’s rating could be constrained at the B (low) level or lower even if Armtec is able to obtain accommodating terms from its lenders, so long as the current debt-laden capital structure is maintained.

Notes:

• Financials are based on Armtec Infrastructure Inc. (Armtec Holdings Limited issued the Senior Unsecured Debt)

All figures are in Canadian dollars unless otherwise noted.

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

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 Companies in the Industrial Products Industry (June 2015), DBRS Criteria: Financial Ratios and Accounting Treatments – Non-Financial Companies (January 2014) and DBRS Recovery Ratings for Non-Investment Grade Corporate Issuers (February 2015), which can be found on our website under Methodologies.