TransLink Credit Rating Remains AA
July 04, 2012
TransLink credit rating remains “AA”
DBRS assessment seen as endorsement of management
TransLink’s bond rating – a key yardstick in assessing a company’s fiscal performance – remains at AA (Stable), according to Dominion Bond Rating Service (DBRS). The agency cited TransLink’s “sound governance structure” and “cautious management” in confirming the ratings for both Counterparty and Senior Unsecured Debt.
“It’s important to note that our rating was confirmed even in the face of the operating and expansion pressures we’re currently facing,” says TransLink CEO Ian Jarvis. “We have to meet the needs of our customers and our growing region, but we also have to maintain high-quality credit ratings to ensure we can continue to access the capital markets on the most cost-effective basis.”
The DBRS assessment cautions about the current uncertainty over funding. Although TransLink had a funded deficit (as defined in the SCBCTA Act) of $34.3 million in 2011, this was $24.8 million better than budget and TransLink still has a healthy reserve ($288 million) at year end. DBRS says the decision by the TransLink Commissioner to reject a fare increase higher than the rate of inflation and the Mayors’ Council request to remove the temporary property tax increase as a funding option will put increased pressure on operations until funding certainty is attained. DBRS credits TransLink with a “conservative” approach for the decision to defer further large projects and concentrate on maintaining current services in a state of good repair.
“This announcement will help us continue to get favourable financing and reduce the burden on taxpayers,” adds Chief Financial Officer Cathy McLay. “This is the second major show of support from the investment community this year for our management.” Earlier this year, TransLink issued an ultra-long (40-year) bond at 3.92 per cent, and quickly raised $100 million. This followed issues in 2010 and 2011, when TransLink raised a total of $500 million through a 10-year bond at 3.88 per cent in 2010 and a 30-year bond at 4.70 per cent in 2011.
These bond issues also reduce TransLink’s dependency on the BC Municipal Financing Authority and leave capital available for other regions in British Columbia.