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

DBRS Limited (DBRS) confirmed the Long-Term Debt and Commercial Paper (CP) 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 are Stable. DBRS notes that STM increased the authorized CP program limit to $750 million from $500 million in August 2017.

The ratings 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. All STM debt, obligations and commitments are fully guaranteed on a joint-and-several basis under the Public Transit Authorities Act. 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 CP, in a period of market disruption or loss of access to capital markets. As of YE2017, the nominal value of CP issuances was $604 million.

The CP program complies with the “DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers” (March 22, 2017). DBRS notes that the City has stable and predictable cash flows in the form of tax installment revenues and ample liquidity available in the form of cash and highly rated Canadian government bonds comfortably covering anticipated same-day CP maturities and total CP program outstandings. The City had $826 million in cash and investments (excluding sinking fund investments) on hand as at December 31, 2017. STM also maintains a $100 million committed line of credit for general operating purposes and limits weekly CP maturities to the size of this facility in accordance with an internal debt management policy. The City has other demand lines of credit for corporate purposes totalling $219.6 million.

As guarantor, the City provides DBRS with certain details regarding STM, STM’s CP program and its $100 million bank facility. For clarity, DBRS notes that it is the City 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 applicable methodologies are Rating Canadian Municipal Governments, DBRS Criteria: Guarantees and Other Forms of Explicit Support, and DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers, which can be found on our website 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.

The full report providing additional analytical detail is available by clicking on the link under Related Research at the right of the screen or by contacting us at info@dbrs.com.

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