DBRS Assigns Rating of BBB with a Stable Trend to New Fixed-to-Floating Rate Subordinated Notes of ATCO Ltd.

DBRS Limited (DBRS) assigned a rating of BBB with a Stable trend to ATCO Ltd.’s (ATCO or the Company; rated A (low) with a Stable trend by DBRS) $200 million 5.50% Fixed-to-Floating Rate Subordinated Notes Series 2018-1 due November 1, 2078 (the Hybrid Notes). DBRS also concluded that it will assign 50% equity treatment to the Hybrid Notes from the Initial Fixed Rate Period beginning November 1, 2018, until November 1, 2028, and will maintain the 50% equity treatment until November 1, 2043, five years before the cumulative step-up in floating-rate period spread reaches 1%. This equity treatment is consistent with “DBRS Criteria: Preferred Share and Hybrid Security Criteria for Corporate Issuers.”

DBRS notes that the Hybrid Notes are direct unsecured subordinated obligations of ATCO and subordinated in right of payment to the prior payment in full of all present and future senior indebtedness, and the Hybrid Notes will be effectively subordinated to all indebtedness and obligations of the Company’s direct and indirect subsidiaries (including partnerships and joint ventures through which ATCO conducts business). DBRS understands that net proceeds from the sale of the Hybrid Notes will be used to reduce existing indebtedness under the credit facilities, which indebtedness was primarily incurred to fund the Company’s recently announced acquisition of a 40% interest in Neltume Ports, a leading port operator and developer in South America, and for other general corporate purposes.

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

The principal methodologies are Rating Companies in the Regulated Electric, Natural Gas and Water Utilities Industry (September 2018), DBRS Criteria: Preferred Share and Hybrid Security Criteria for Corporate Issuers (December 2017) and DBRS Criteria: Rating Corporate Holding Companies and Their Subsidiaries (December 2017), which can be found on dbrs.com under Methodologies.

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.

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