Dominion Bond Rating Service is confirming the long-term debt rating of Lindsey Morden Group Inc. with a continuing negative trend.

The rating agency says that while the financial flexibility of Lindsey remained limited in 2003, in July 2004, a Lindsey subsidiary borrowed $105 million from Brascan Bridge Lending Fund in the form of an unsecured term facility, which is positive in that the company has now secured established funding for the short term.

DBRS notes that the company can still continue to rely on its parent, Fairfax Financial Holdings, to provide support until at least March 2006. Lindsey has relied upon Fairfax in the past to help it meet its liquidity needs, DBRS says.

“In terms of operations, after a strategic review of the U.S. business, it became clear that the U.S. third-party claims administration segment continued to face significant challenges in its market, and accordingly the business unit was sold in March 2004,” DBRS says. The company reported a net loss on disposal of $16 million in the first quarter of 2004 to reflect this divestiture, but the remaining operations in the U.S. will now represent a much smaller part of the company.

“In 2003, Canadian division results reflected the higher claim levels due to flooding in Atlantic Canada, Hurricane Juan, and hailstorms in western Canada, there has been a decline in overall claim frequency which negatively impacts the business,” it says.

“The company continues to focus on developing non-weather-related products and services, as well as close management of costs. Despite management’s focus on cost reduction and improved performance in the U.K. and International divisions, results for the first quarter based on a free cash flow measure were disappointing, with all segments except the U.S. reporting a decline in cash flow. While Lindsey has taken steps to position itself for recovery, the company needs to meaningfully strengthen cash flow relative to the size of total debt.”