DBRS Comments on Canadian Oil Sands Limited Following Agreement with Suncor Energy Inc.

DBRS Limited (DBRS) today notes that Suncor Energy Inc. (Suncor; rated A (low) and Canadian Oil Canadian Oil Sands Limited (COS; rated BBB (low by DBRS)) have reached an agreement supporting an amended offer by Suncor to purchase all the shares of COS. Suncor’s amended all-equity offer provides for an increase in the share exchange ratio for COS shareholders to 0.28 (from 0.25) of a Suncor share for each COS share. The amended offer has a total aggregate transaction value of approximately $6.6 billion, including COS’s estimated debt of $2.4 billion, and has the support of the board of directors of both companies. COS has a 36.74% equity interest in Syncrude Canada Ltd. The amended offer is set to expire on February 5, 2016. A key condition includes the tendering of at least 51% of the outstanding shares.

In the October 5, 2015, press release, DBRS noted that it was uncertain (1) whether the takeover bid will be accepted, and (2) as to how Suncor plans to ultimately deal with COS’s debt. With the support of the COS board and significant shareholder support of the amended offer, the likelihood of the tender condition not being met is relatively low. However, at this time it remains uncertain as to how Suncor plans to ultimately restructure COS’s debt. As such, DBRS will continue to review Suncor’s financing plan (assuming success) as new information becomes available and will take an appropriate rating action if needed in the future.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The applicable methodology is Rating Companies in the Oil and Gas Industry, which can be found on our website under Methodologies.