Standard & Poor’s Ratings Services affirmed its ratings on RBC Dexia Investor Services Ltd., following the news that Royal Bank of Canada (TSX:RY) plans to take full ownership of the firm.
Earlier this week, RBC announced that it has signed a share purchase agreement to acquire the 50% of its joint venture, RBC Dexia, which is owned by Belgium’s Dexia S.A.
In the wake of the announcement, S&P is affirming its ratings on the firm, removing it from CreditWatch negative, and the rating now has a stable outlook. The rating agency says that it is equalizing its ratings on RBC Dexia with its ratings for RBC. As a result, any rating action on RBC would trigger the same action on RBC Dexia.
S&P says that the acquisition reinforces its view that RBC Dexia is a “core” subsidiary of RBC, which has both the ability and willingness to provide full support to RBC Dexia.
Looking ahead, S&P says that it could lower the ratings on RBC Dexia if it considered RBC to be less committed to RBC Dexia in the future, or if RBC Dexia’s prospective ownership structure changed. It would also review the ratings if the transaction did not close, although it says this outcome appears “very remote at this stage.”