DBRS Confirms Société de transport de Montréal at A (high) and R-1 (low)

DBRS Limited (DBRS) has today confirmed the Long-Term Debt and Commercial Paper ratings of the Société de transport de Montréal (STM) at A (high) and R-1 (low), respectively, reflecting the recent confirmation of the City of Montréal (the City; rated A (high) by DBRS). The trends remain Stable. As noted in past DBRS press releases, ratings on STM are primarily based on the credit profile of the statutory guarantors comprising the 16 municipalities of the Urban Agglomeration of Montréal, and specifically the City of Montréal. DBRS believes that the City has a strong incentive and the capacity to provide timely liquidity support to STM should it encounter difficulties in meeting its financing obligations, including rolling its short-term commercial paper, in a period of market disruption or loss of access.

The $500 million commercial paper program of STM does not meet certain aspects of the DBRS criteria “Commercial Paper Liquidity Support for Non-Bank Issuers,” particularly the criteria’s standard of having 100% committed bankline support. However, DBRS believes that an exception to this criteria is warranted in this situation because (1) the credit focus is on the relatively strong guarantor, as all STM debt, obligations and commitments are fully guaranteed by the City and 15 other municipalities on a joint and several basis under the Public Transit Authorities Act; and (2) DBRS believes that the City has both the ability and the willingness to assist STM with liquidity if ever needed, noting that the City has a strong level of liquidity.

As guarantor, the City provides DBRS with certain details regarding STM, its commercial paper program and the $100 million STM bankline support facility. For clarity, DBRS notes that it is the City, not STM, that provides DBRS with sufficient information to rate the program.

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.

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

The principal methodologies are Rating Canadian Municipal Governments, DBRS Criteria: Guarantees and Other Forms of Support and DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers, which can be found on dbrs.com under Methodologies.

The rated entity or its related entities did participate in the rating process. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities.