DBRS Places Enercare Solutions Inc. Under Review with Developing Implications Following Acquisition Announcement

DBRS Limited (DBRS) placed Enercare Solutions Inc.’s (Enercare or the Company) Issuer Rating and Senior Notes rating of BBB Under Review with Developing Implications. The rating action follows the announcement that the Company’s 100% owner, Enercare Inc., has entered into an arrangement agreement with Brookfield Infrastructure Partners L.P. and its institutional partners (collectively, Brookfield) to be acquired for $4.3 billion, including the assumption of debt (the Acquisition). The Acquisition is subject to Enercare Inc.’s shareholder and Ontario Superior Court of Justice approvals and is expected to close by the end of 2018.

The Under Review with Developing Implications status reflects the uncertainty of the corporate structure of Enercare following the Acquisition. It also incorporates uncertainty over the future strategic direction and financial management of the Company under Brookfield. DBRS notes that, upon closing, the Acquisition is expected to trigger a change of control under the Indentures governing the Senior Notes of the Company. If, within 60 days of the change of control, the Senior Notes rating of Enercare is downgraded to non-investment grade, the provision requires that an offer be made to repurchase the Senior Notes at a price equal to 101% of the principal amount plus all accrued and unpaid interest. DBRS notes that Brookfield and Enercare have stated that the Acquisition has been structured with the intent of maintaining the current BBB ratings. DBRS will continue to review the Acquisition and aims to resolve the Under Review status of the ratings once more details are known.

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

The principal methodology is Rating Companies in the Consumer Products Industry (August 2017), which can be found on dbrs.com under Methodologies. However, DBRS views Enercare’s strong franchise as having a superior business risk profile than that of a traditional consumer products company. As a result, the Company is able to manage higher-leverage metrics.

Overall, in DBRS’s assessment of the credit quality of Enercare, DBRS factors in the following key items: (1) competition arising from regulatory changes, (2) effects of attrition on the customer base, (3) stability of cash flow generated from the customer base, (4) flexibility to increase rental rates and (5) dependency on new home developments for growth.

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 under Related Documents or by contacting us at info@dbrs.com.

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

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