DBRS Confirms and Discontinues Ratings of Tim Hortons Inc.

DBRS Limited (DBRS) has today confirmed the Issuer Rating of Tim Hortons Inc. (Tim Hortons or the Company) at BB (low) and its Senior Unsecured Debt at B, with a recovery rating of RR6. The trends are Stable. DBRS has subsequently discontinued the Issuer Rating and Senior Unsecured Debt rating of the Company as the engagement of DBRS by the Company has terminated. The discontinuation is not reflective of any change in the credit quality of the Issuer.

The confirmation of the ratings is based on Restaurant Brands International’s (RBI) solid operating performance, cost-cutting initiatives and modest deleveraging, since its formation. RBI’s same-store sales growth has been solid through Q3 2015 and the Company has announced franchise agreements aimed at accelerating the pace of Tim Hortons’ growth in the United States. Tim Hortons’ ratings continue to reflect DBRS’s view on its parent company, RBI, owner of the Burger King and Tim Hortons brands. The ratings continue to benefit from scale as the third-largest global quick service restaurant, well-recognized brands, strong market positions and geographic diversification. The ratings also reflect competition in the quick-service restaurant sector, as well as the Company’s high relative leverage and focus on increasing shareholder returns.

DBRS believes RBI’s revenues and earnings will continue to grow based on low- to mid-single-digit same-store sales growth and accelerating new restaurant growth in the United States and globally. The Company’s free cash flow will continue to benefit over the longer term from a shift toward a capital light franchising model, requiring less capital investment in the growth of Tim Hortons. DBRS expects the Company will continue to focus on balancing its deleveraging efforts with increasing returns to shareholders.

Notes:
All figures are in U.S. 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 Companies in the Merchandising Industry, DBRS Criteria: DBRS Recovery Ratings for Non-Investment Grade Corporate Issuers and Preferred Share and Hybrid Criteria for Corporate Issuers which can be found on our website under Methodologies.

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

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.