DBRS Discontinues Veridian Corporation, Assigns New Rating of “A” with a Stable Trend to Elexicon Corporation

DBRS Limited (DBRS) discontinued the Issuer Rating of Veridian Corporation (Veridian). This rating action follows the merger between Veridian and Whitby Hydro Energy Corporation (Whitby Hydro) on April 1, 2019, to form Elexicon Corporation (Elexicon or the Company). DBRS concurrently assigned an Issuer Rating of “A” with a Stable trend to Elexicon.

Elexicon’s business risk assessment is underpinned by the reasonable regulatory regime in Ontario. DBRS notes that Veridian and Whitby Hydro were both regulated by the Ontario Energy Board under the same regulatory framework. The Company is also expected to benefit from operating efficiencies and cost savings, especially given that Whitby Hydro’s franchise area was contiguous with Veridian’s. Under the current regulatory regime, shareholders of Elexicon will retain the benefit of operating synergies following a merger for up to ten years.

Elexicon’s financial risk assessment is also expected to be in line with the assigned rating. Veridian’s key credit metrics had consistently been strong for the rating category, and Whitby Hydro’s metrics would also have been supportive of the “A” rating category. As no debt will be issued for the merger, Elexicon’s key credit metrics are expected to be in line with the “A” rating.

DBRS additionally notes that while debt at the Elexicon holding company level is structurally subordinate to debt at the operating utility, Elexicon Energy Inc., this structural subordination is mitigated by (1) the immaterial amount of external debt at the holding company level ($1.5 million; around 1% of total consolidated debt), which the Company intends to fully repay by the end of 2019; and (2) the fact that Elexicon has no intention of issuing additional debt at the holding company level going forward.

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

The principal methodologies are Rating Companies in the Regulated Electric, Natural Gas, and Water Utilities Industry (September 2018) and DBRS Criteria: Rating Corporate Holding Companies and Their Subsidiaries (November 2018), which can be found on dbrs.com under Methodologies & Criteria.

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.

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