Moody's rates Dollarama floaters B3, lifts loans to Ba1

Moody's Investors Service said it assigned a B3 rating with a loss-given-default assessment of LGD5 (82%) to Dollarama Group Holdings LP's $200 senior floating-rate deferred-interest notes and upgraded the C$75 million revolving credit facility, C$120 million term loan A and $246 million secured term loan B of Dollarama Group LP to Ba1 (LGD2, 18%) from Ba2 (LGD2, 21%).

The agency affirmed Dollarama Group Holdings' corporate family and probability-of-default ratings at B1 and speculative grade liquidity rating at SGL-2 and Dollarama Group LP's $200 million senior subordinated notes at B2 (LGD4, 59%).

The outlook was changed to negative from stable.

Proceeds from the new notes will be used to repay C$150 million of the company's junior subordinated notes and make a distribution on some of its equity securities, in each case held by affiliates of its majority owner, Bain Capital, resulting in a 0.6x increase in the debt-to-EBITDA ratio to 6.9x.

The agency said the ratings recognize Dollarama's solid franchise, broad though somewhat regional retail network in Eastern Canada and its favorable competitive position, balanced by weak credit metrics resulting from its highly leveraged balance sheet.

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