DBRS Confirms Société de transport de Montréal at A (high)/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) with a Stable trend by DBRS). The trends are Stable. The ratings are based on the statutory guarantees from the 16 municipalities comprising the Urban Agglomeration of Montréal and, specifically, the City. 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 during a period of market disruption or loss of access to capital markets. As of December 31, 2018, the nominal value of CP issuances was $391.0 million, with an authorized program limit of $750.0 million.

The CP program complies with the “DBRS Criteria: Commercial Paper Liquidity Support for Non-Bank Issuers” (March 15, 2019). 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 $914.5 million in cash and investments (excluding $2.6 billion in sinking fund investments) on hand as at December 31, 2018. 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 $219.1 million.

As guarantor, the City provides DBRS with certain details regarding STM and STM’s CP program and $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 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 & 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.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada