Morningstar DBRS Finalizes Provisional Credit Rating of BB With a Stable Trend on Sollio Cooperative Group's Senior Unsecured Notes

DBRS Limited (Morningstar DBRS) finalized the provisional credit rating of BB with a Stable trend on Sollio Cooperative Group's (Sollio or the Company, rated BB (high) with a Stable trend) Senior Unsecured Notes (the Notes), which closed on July 3, 2025. The Recovery Rating on the Notes is RR5.

The credit rating on the Notes is applicable to the following series: CAD 200 million, 6.00% Senior Unsecured Notes, due July 3, 2030. The proceeds of the Notes are intended to be used (i) to fund the repurchase or redemption of a portion of its outstanding preferred shares of different series (including accrued dividends, as applicable, if any), including the redemption in full of Sollio's Series 8 - 2020 preferred investment shares, and (ii) for the payment of transaction fees and expenses. The Notes will be senior unsecured obligations and will rank equally and pari passu with our other present and future unsecured obligations. The Notes will rank senior in right of payment to all of Sollio's existing and future subordinated obligations. The Notes will be initially fully and unconditionally guaranteed solidarily (jointly and severally), on a senior unsecured basis, by the existing and future subsidiaries that, subject to specified exemptions, are borrowers under or provide guarantees with respect to Sollio's Revolving Credit Facility, for so long as guarantees are in place thereunder. The Notes and the guarantees will be effectively subordinated to all of Sollio's and the guarantors' respective future secured obligations, to the extent of the value of the assets securing such obligations. The Notes will be structurally subordinated to all existing and future obligations, including indebtedness and trade payables, of any of Sollio's subsidiaries that do not guarantee the Notes.

CREDIT RATING DRIVERS
Should the Company materially improve its business risk profile through increased size and diversification while credit metrics are sustained at levels acceptable for the higher credit rating category (i.e., debt-to-EBITDA comfortably below 3.50x), Morningstar DBRS could take a positive credit rating action. Conversely, should operating performance deteriorate and/or the Company implement more aggressive financial management practices such that credit metrics weaken to levels no longer appropriate for the current credit ratings (i.e., debt-to-EBITDA above 4.50x), Morningstar DBRS would likely take negative rating action.

CREDIT RATING RATIONALE
Comprehensive Business Risk Assessment (CBRA): Sollio's CBRA of BBH is supported by the Company's established brands, market position, and distribution network as well as by the business risk benefits associated with the Company's cooperative structure and the high barriers to entry in the agri-food business. The CBRA also takes into consideration Sollio's relative geographic concentration, competitive market environment, exposure to economic cycles (particularly in the home improvement segment), and volatility in the Olymel business segment

Comprehensive Financial Risk Assessment (CFRA): Sollio's CFRA of BBH reflects Morningstar DBRS' expectation that the Company will prudently manage capital allocation priorities, particularly in the case of any earnings volatility, to maintain key credit metrics at levels that are acceptable for the current rating category.

Intrinsic Assessment (IA): The IA of BBH is within the Intrinsic Assessment range and is based on the CBRA and CFRA, also taking into consideration peer comparisons, among other factors.

Additional Considerations: The credit ratings include no further negative or positive adjustments from additional considerations.

ENVIRONMENTAL, SOCIAL, AND GOVERNANCE CONSIDERATIONS

There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025) https://dbrs.morningstar.com/research/454196.

Further details on the Issuer's Intrinsic Assessment can be found at https://www.dbrsmorningstar.com/research/456599.

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

Morningstar DBRS applied the following principal methodologies:
Global Methodology for Rating Companies in Services Industries (February 03, 2025)
https://dbrs.morningstar.com/research/447184

Global Methodology for Rating Companies in Manufacturing and Production Industries (February 03, 2025)
https://dbrs.morningstar.com/research/447185

Morningstar DBRS credit ratings may use one or more sections of the Morningstar DBRS Global Corporate Criteria (February 3, 2025) - https://dbrs.morningstar.com/research/447186 which covers, for example, topics such as holding companies and parent/subsidiary relationships, guarantees, recovery, and common adjustments to financial ratios.

The following methodologies have also been applied:

Morningstar DBRS Global Corporate Criteria (February 03, 2025)
https://dbrs.morningstar.com/research/447186

Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Factors in Credit Ratings (May 16, 2025)
https://dbrs.morningstar.com/research/454196

The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.

A description of how Morningstar DBRS analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/431153.

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@morningstar.com.

The credit rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the credit rating process for this credit rating action.

Morningstar DBRS had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.

This is a solicited credit rating.

For more information on Morningstar DBRS' policy regarding the solicitation status of credit ratings, please refer to the Credit Ratings Global Policy, which can be found in the Morningstar DBRS Understanding Ratings section of the website: https://dbrs.morningstar.com/understanding-ratings

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

Information regarding Morningstar DBRS credit ratings, including definitions, policies, and methodologies, is available on dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 600
Toronto, ON M5H 3M7 Canada
Tel. +1 416 593-5577