DBRS might drop Sherritt

DBRS said it placed the ratings of Sherritt International Corp. under review with negative implications following the company's announcement that it intends to divest its coal business unit in a two-part transaction for total consideration of C$946 million comprising roughly C$793 million of anticipated cash proceeds and the assumption of capital leases valued at C$153 million (subject to closing adjustments).

Sherritt indicated that the divestiture of its coal unit is expected to enhance the liquidity of the company and to give it flexibility to pursue opportunities to develop and grow its core businesses, as well as providing funds for debt repayment. The divestiture transaction is expected to close in the first quarter of 2014 and remains subject to customary closing conditions and consents, including applicable Competition Bureau, Investment Canada Act and court approvals.

DBRS said it believes that the announced transaction, if completed as contemplated, will materially erode Sherritt's business profile and significantly change the company's financial profile and liquidity. As a result, following an assessment of the business profile, prospects, go-forward strategy and financial profile of the remaining entity, a potential multi-notch downgrade of Sherritt's ratings may result.

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