Bulletin: Canadian Tire's Repurchase Of Its Financial Services Unit Will Reduce Leverage Headroom

This report does not constitute a rating action. TORONTO (S&P Global Ratings) Oct. 31, 2023--S&P Global Ratings said today that Toronto-based retailer Canadian Tire Corp. Ltd.?s (BBB/Stable/A-2) repurchase of the company?s 20% stake in Canadian Tire Financial Services (CTFS) for C$895 million is, by itself, ratings neutral; however, when combined with our expectation of continued weaker earnings, we believe it will reduce leverage headroom under the ratings. As we already incorporate a C$567-million put liability related to this stake into our adjusted debt calculation, the incremental C$328-million increase in debt is manageable (it adds about 0.2x to adjusted leverage), in our view. The company expects to fund the transaction through a new 18-month term loan and existing bank facilities and/or

...October 31, 2023 This report does not constitute a rating action. TORONTO (S&P Global Ratings) Oct. 31, 2023--S&P Global Ratings said today that Toronto-based retailer Canadian Tire Corp. Ltd.'s (###/Stable/A-2) repurchase of the company's 20% stake in Canadian Tire Financial Services (CTFS) for C$895 million is, by itself, ratings neutral; however, when combined with our expectation of continued weaker earnings, we believe it will reduce leverage headroom under the ratings. As we already incorporate a C$567-million put liability related to this stake into our adjusted debt calculation, the incremental C$328-million increase in debt is manageable (it adds about 0.2x to adjusted leverage), in our view. The company expects to fund the transaction through a new 18-month term loan and existing bank facilities and/or commercial paper program drawings. In future, Canadian Tire will benefit from 100% ownership of CTFS but will likely incur higher debt costs to finance the transaction. We expect...

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