S&P assigns BBB to EnerCare notes

S&P said it assigned its BBB issue-level rating to EnerCare Solutions Inc.'s proposed C$500 million senior unsecured notes.

The company plans to issue the notes in two tranches comprising C$275 million due 2022 and C$225 million 2024.

The agency expects proceeds to be used to repay the C$250 million unsecured notes due Nov. 30, 2017, the C$210 million term debt due Oct. 18, 2018 and a portion of the amounts drawn on the company's revolving credit facility.

S&P said it considers the proposed transaction neutral to EnerCare Solutions' credit metrics and the corporate credit and other ratings are unchanged. That said, the agency believes the transaction will improve the company's debt maturity profile, which supports the view of its liquidity.

“Our BBB ratings and stable outlook on the company reflect our view of EnerCare Solutions' large share of the concentrated water heater rental market in Ontario, which contributes the majority of the company's earnings,” S&P said in a news release.

“Furthermore, the water heater rental segment generates what we consider high EBITDA margins and stable earnings compared with other companies in the business and consumer services industry.

The agency continues to expect EnerCare’s adjusted debt-to-EBITDA to be 3 times to 3.5 times over the next couple of years, which is appropriate for the current rating level.

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