Avison Young (Canada) Inc.

Avison Young's acquisitive growth strategy over the past several years also makes its leverage profile unsustainable, in our view. While the debt-funded acquisitions have increased the company's scale and international footprint, the higher debt servicing costs have significantly increased the company's liquidity risk, especially in the current "higher for longer" interest rate environment. The negative outlook reflects our view that the company's liquidity will be under stress for the next six to 12 months, and without additional sources of liquidity and amendments of the existing credit agreements (such as maturity extensions and covenant waivers), Avison Young is unlikely to meet its liquidity needs. We could lower the ratings if we believed that a default event, which would include insufficient liquidity

...Avison Young (Canada) Inc.'s liquidity will be under stress for the next six to 12 months, and without additional sources of liquidity as well as amendments to the existing credit agreements (such as maturity extensions and covenant waivers), the company is unlikely to meet its liquidity needs. The company will likely face debt acceleration in 2024 triggered by the drawdown of the second-lien liquidity facility. We don't think that Avison Young will be able to address the accelerated debt maturity given its existing liquidity sources, although we note that the company is discussing potential amendments with its lenders (see "Research Update: Avison Young (Canada) Inc. Downgraded To '###' On Deteriorating Liquidity; Outlook Negative," published Sept. 8, 2023). We expect Avison Young's EBITDA cash interest coverage to remain well below 1.0x over the next six to 12 months because of the challenging commercial real estate (CRE) environment. Uncertainty about interest rates has delayed the CRE...

Full Report