Avison Young (Canada) Inc. Downgraded To 'B-' From 'B+' On Preferred Stock Issuance; Outlook Stable

Avison Young (Canada) has agreed to issue CAD$250 million in preferred equity, drawing CAD$180 million at closing. The company will use CAD$80 million of the proceeds to redeem an institutional shareholder and certain other non-management founders and former Principals and use the remaining CAD$170 million as growth capital. We view the preferred issuance as debt and believe Avison Young's leverage could reach 10x net debt to adjusted EBITDA as the funds are deployed. We are lowering our issuer credit rating on Avison Young by two notches to 'B-' and our rating on its senior secured notes by a notch to 'B'. We are lowering the senior notes by only a notch because we believe the insertion of preferred stock in

...+ Avison Young (Canada) has agreed to issue CAD$250 million in preferred equity, drawing CAD$180 million at closing. The company will use CAD$80 million of the proceeds to redeem an institutional shareholder and certain other non-management founders and former Principals and use the remaining CAD$170 million as growth capital. + We view the preferred issuance as debt and believe Avison Young's leverage could reach 10x net debt to adjusted EBITDA as the funds are deployed. + We are lowering our issuer credit rating on Avison Young by two notches to 'B-' and our rating on its senior secured notes by a notch to 'B'. We are lowering the senior notes by only a notch because we believe the insertion of preferred stock in the capital structure would boost the recovery prospects of those notes in a default. + The stable outlook balances the additional financial flexibility provided by the new capital and lack of near-term maturities against our expectations for leverage to rise materially in the...

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