CI Financial Corp. asked Morningstar DBRS to withdraw its ratings on CI and its debt, but the rating agency will continue covering the firm.
Morningstar DBRS cut its ratings on the Toronto-based wealth manager and its subsidiary, CI Investments Inc., to BBB (low) from BBB earlier this year.
In a release Wednesday, CI said that it had requested Morningstar DBRS drop its coverage over concerns with the agency’s ratings methodology, which relied on IFRS metrics as opposed to the firm’s adjusted results that CI said more “appropriately reflect the company’s underlying results and financial condition.”
For example, under the rating agency’s methodology, double-digit swings in CI’s leverage ratio had occurred over short periods, CI said in the release.
Morningstar DBRS, however, indicated it would continue rating CI on an “unsolicited” basis. As a result, CI said, the firm’s management would no longer engage with the agency, and unsolicited ratings from Morningstar DBRS would be based on public information.
In a release Thursday, Morningstar DBRS confirmed it planned “to maintain its coverage on CI on an unsolicited basis in accordance with the applicable Morningstar DBRS methodologies, policies and procedures.”
On May 30, Morningstar DBRS cut CI’s credit rating “to reflect [CI’s] persistently high debt-to-EBITDA ratio and deteriorating fixed-charge coverage ratio, as the company continues to prioritize buying back shares over deleveraging.”
The rating agency also noted that its outlook on CI’s credit ratings also remained negative, reflecting “deteriorating credit fundamentals.”
In April, Moody’s Ratings downgraded CI’s debt to Baa3 from Baa2.
CI’s request to Morningstar DBRS represents the second time the firm has asked a rating agency to withdraw its coverage.
In May 2023, S&P Global Ratings withdrew its rating of CI following a request from the firm, but only after downgrading CI to BB+ from BBB- and revising the rating outlook for CI to stable from negative.
As of June 30, CI reported net debt of $3.5 billion, up from $2.9 billion at the end of the same quarter last year, and a net debt to adjusted EBITDA ratio of 3.5, up from 2.9 at the end of the same quarter the previous year.
In July, CI acquired two U.S.-based registered investment advisors with combined assets under management of $8.1 billion, and in May, the firm acquired two U.S. family offices with combined assets of $5.7 billion.
On Aug. 26, CI announced a share buyback, saying it would purchase up to five million of its outstanding common shares for cash at $17.50 per share.
At the close of trading Sept. 12, CI’s share price was $17.63.