chart showing downward movement
Adam Smigielski

Amid elevated leverage, rating agency DBRS Ltd. (Morningstar DBRS) downgraded its ratings on CI Financial Corp.

In a report released Thursday, Morningstar DBRS said it cut its ratings on CI and its subsidiary, CI Investments Inc., to BBB (low) from BBB.

“The credit rating downgrades reflect the persistently high debt-to-EBITDA ratio and deteriorating fixed-charge coverage ratio, as the company continues to prioritize buying back shares over deleveraging, a strategy that is expected to continue,” the rating agency said.

Morningstar DBRS noted that its outlook on CI’s credit ratings remains negative too, “[reflecting] deteriorating credit fundamentals, including weakened earnings with the revenue from the asset management business continuing to decline relative to prior years.”

Additionally, it said stronger wealth-management earnings and higher assets under administration, particularly in the U.S., driven by multiple acquisitions of registered investment advisor firms “has not been able to offset the very high level of expenses, including those related to deferred acquisition costs.”

“This strategy has enabled the company to diversify its earnings by client type and geography, which Morningstar DBRS views positively,” it said, noting that CI reported record assets of $474.2 billion in the first quarter.

“CI’s lower credit rating, combined with significant debt decreases its financial flexibility and their ability to withstand a stressed environment,” the report said.