DBRS Morningstar Confirms George Weston Limited at BBB, Stable

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and Notes & Debentures rating of George Weston Limited (George Weston or the Company) at BBB as well as its Preferred Shares rating at Pfd-3, all with Stable trends. The confirmation is concurrent with DBRS Morningstar’s confirmation of Loblaw Companies Limited’s (Loblaw) ratings at BBB (high) (see the press release dated June 24, 2022) as well as its confirmation of Choice Properties Real Estate Investment Trust’s (Choice) rating at BBB (high) (see the press release dated June 24, 2022).

The confirmations of George Weston’s ratings are based on (1) the Company’s position as the holding company of Choice (approximately 61.7% ownership), (2) the Company’s position as the holding company of Loblaw (approximately 52.6% ownership), and (3) the quality of the Company’s liquidity profile. DBRS Morningstar primarily bases George Weston’s ratings on a weighted-average subsidiary rating (WASR) of BBB based on the respective contributions of Loblaw and Choice to George Weston’s cash flows, through dividends and distributions, and adjusted for George Weston’s ownership interest in each entity with a one-notch penalty for structural subordination. DBRS Morningstar combines this WASR with an assessment of George Weston’s liquidity profile, which DBRS Morningstar views as strong for the BBB rating.

DBRS Morningstar notes that, as long as the ratings on Loblaw and Choice are BBB (high), the ratings on George Weston, as a pure holding company, would effectively be capped at the BBB level because of the structural subordination. Conversely, although unlikely, George Weston's ratings could be lowered if DBRS Morningstar downgraded Loblaw and Choice or should George Weston’s nonconsolidated debt levels exceed 20% of nonconsolidated capital, which may result in the one-notch differential between the subsidiaries, Loblaw and Choice, and George Weston being inadequate.

DBRS Morningstar expects that, after satisfying interest expenses, taxes, and other corporate expenses at George Weston, the Company will continue to use the contributions received from Loblaw and Choice, in combination with proceeds from the participation in Loblaw’s share repurchase program, for returns to shareholders through dividends and share repurchases.

For details on Choice’s and Loblaw's credit risk profile and operating performance, please reference the respective press releases and rating reports, which can be found on dbrsmorningstar.com.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factors that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929/dbrs-morningstar-criteria-approach-to-environmental-social-and-governance-risk-factors-in-credit-ratings.

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

The principal methodologies are DBRS Morningstar Criteria: Rating Corporate Holding Companies and Parent/Subsidiary Rating Relationships (October 29, 2021; https://www.dbrsmorningstar.com/research/386615), Rating Companies in the Merchandising Industry (July 26, 2021; https://www.dbrsmorningstar.com/research/382073), Rating Entities in the Real Estate Industry (April 20, 2022; https://www.dbrsmorningstar.com/research/395563), and DBRS Morningstar Criteria: Preferred Share and Hybrid Security Criteria for Corporate Issuers (October 21, 2021; https://www.dbrsmorningstar.com/research/386355), which can be found on dbrsmorningstar.com under Methodologies & Criteria. Other applicable methodologies include the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings (May 17, 2022; https://www.dbrsmorningstar.com/research/396929).

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 [email protected].

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

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at [email protected].

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