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. DBRS has also confirmed CDP Financial Inc.’s Long-Term Debt rating at AAA and the Canadian Short-term Promissory Notes, U.S. Commercial Paper Notes and Euro Commercial Paper Notes ratings at R-1 (high), based on the unconditional and irrevocable guarantee provided by the Caisse. The trends on all the ratings remain Stable. The ratings are supported by the Caisse’s exclusive investment mandates with its largest depositors, its low recourse debt burden, large base of unencumbered assets and substantial liquidity position.

The Caisse achieved a return of 12% in 2014, exceeding its benchmark by 60 basis points (bps). Performance was generally strong across assets classes led by equities as increased exposure to the U.S. market was rewarded by strong returns. Fixed income also posted one of its strongest returns in recent years because of the decline in bond yields mid-year. Combined with modest net contributions, investment returns drove net assets 12.8% higher to $225.9 billion. The first half of 2015 saw investment returns drive net assets higher still to $240.8 billion, though the market has experienced significant volatility in the second half of the year, challenging investment returns.

At year-end 2014, debt with recourse to the Caisse amounted to $11.5 billion and manageable within the rating at 4.9% of adjusted net assets on a cost basis (5.5% fair market value (FMV) basis). The increase in the FMV of the debt was largely attributable to the increase in U.S. commercial paper outstanding and the impact of lower interest rates and a weaker Canadian dollar on the medium-term notes. Commercial paper outstanding has remained stable through 2015 and $1 billion in medium-term notes matured in July. As such, the debt ratio has fallen through 2015 and is expected to remain notably lower than the internal limit of 10% of adjusted net assets for the foreseeable future, which is commensurate with the ratings. Liquidity has remained high, well in excess of DBRS’s requirement of 1.5 times the size of the aggregate CP program limit, which is illustrative of the Caisse’s considerable financial flexibility.

The investment climate is expected to remain uncertain over the near term as monetary authorities begin to normalize interest rates and governments undertake reforms to support economic growth. Despite these challenges, the Caisse remains well positioned to meet the needs of depositors. The organization continues to expand its reach internationally and enhance its institutional capacity, while simultaneously working to strengthen the support it provides to depositors.

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, DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers and DBRS Criteria: Guarantees and Other Forms of Explicit Support, which can be found on our website under Methodologies.

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