DBRS Confirms CI Financial Corp. at A (low), Stable

DBRS Limited (DBRS) has today confirmed the Issuer Rating of CI Investments Inc. (CII) and the Senior Unsecured Debentures of CI Financial Corp. (CI or the Company) at A (low). The trends on these ratings remain Stable. At the same time, DBRS has discontinued two ratings related to older guaranteed debts that have been repaid, specifically the Senior Unsecured Debentures (guaranteed) rating for CI and the Senior Unsecured Debt (guaranteed) rating of CII following the redemption of the last of these instruments on December 14, 2015.

The Issuer Rating of CII reflects its contribution to CI as its major operating subsidiary, housing the mutual fund manufacturing operation and representing more than 95% of consolidated CI earnings. The rating on the CI debentures reflects the rating of CI as the parent of CII with the CI rating equalized with CII’s Issuer Rating due to the absence of structural subordination following DBRS’s criteria “Rating Holding Companies and Their Subsidiaries” (January 2015).

The primary driver of the ratings is the Company’s business franchise, relatively large size in the Canadian mutual fund industry and resulting scale/efficiency. Tempering these factors are the general uncertainty and volatility inherent in equity markets and increased competition from other wealth management service providers and products, which pressure the business model, market share and margins.

CI’s assets under management have continued to grow in 2015 and, consequently, so have its earnings. With CI’s low debt levels, the Company’s strong and stable cash flow easily covers debt obligations and reduces concern over the high dividend payout ratio and negative net tangible equity. Under DBRS’s methodology “Rating Companies in the Asset Management Industry” (January 2015), CI performs very well on both business strengths and financial metrics, resulting in its strong investment-grade rating.

While an increase in diversification or successful expansion of the business may have a positive impact on CI’s credit quality, DBRS notes also that factors with potential negative implications include impairment of goodwill and intangibles, a degradation of debt coverage metrics, a material, sustained loss of market share or the introduction of credit or other risks.

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 and criteria are Rating Companies in the Asset Management Industry (January 2015) and Rating Holding Companies and Their Subsidiaries (January 2015), which can be found on our website under Methodologies.

These ratings have been endorsed by DBRS Ratings Limited for use in the European Union.