Adam Smigielski

DBRS Morningstar has changed the trend of CI Financial Corp. and subsidiary CI Investments Inc. to negative from stable while confirming the ratings of the firms at BBB, the rating agency said Wednesday.

“The change in the trend to negative reflects the deterioration in CI’s credit fundamentals, including weaker earnings, still very high leverage, even with paying down some debt recently, and a lower fixed charge coverage ratio,” the DBRS report said.

On May 2, S&P Global Ratings dropped its credit rating of CI Financial Corp. to BB+ from BBB- and revised the rating outlook of the firm to stable from negative. S&P then withdrew its ratings of CI Financial, as the firm had requested prior to the downgrade.

A deal CI Financial announced May 11 to sell a 20% stake of its CI U.S. business to a group of institutional investors for $1.34 billion would help lower the firm’s debt levels by approximately $1 billion this quarter, DBRS said.

On May 23, Moody’s Investors Services affirmed its Baa2 long-term issuer and senior unsecured debt ratings of CI Financial following the company’s sale of the minority stake of the U.S business.

In its ratings announcement Wednesday, DBRS said CI’s leverage will remain elevated and its fixed charge ratio will stay low because the company redeemed mostly its lower-cost debt.

“In order to retain a majority interest in CI US, the company will have to grow at a pace that is comparable to the past two years, which would be much more challenging under the current market conditions, and may lead to additional borrowing,” the agency said.

However, the firm’s “ratings are supported by CI’s strong market share in the Canadian asset management industry, as well as growing wealth management fees following the numerous acquisitions CI has completed in the U.S. RIA market, both of which contribute sizable and relatively stable cash flows,” DBRS said.

This article was updated to include information about Moody’s rating.