DBRS puts Newalta on review

DBRS said it placed the BB issuer rating and the BB unsecured notes rating of Newalta Corp. under review with developing implications following news that the company agreed to sell its industrial division for C$300 million in cash to Birch Hill Equity Partners, which also agrees to assume the associated asset-retirement obligation.

The company said it intends to use the proceeds to pay down debt and support investment in organic growth opportunities, DBRS said.

The transaction is subject to satisfaction of customary closing conditions, regulated approvals and is expected to close in the first quarter of 2015, the agency said.

DBRS noted that the net impact of the divestment and the use of proceeds to reduce the draw on the credit facility and to fund organic growth opportunities are modestly positive to the overall risk profile of the company.

The divestment would modestly weaken Newalta’s business risk profile as it would cause a reduction in business and geographical diversity, the agency said, and an increased concentration in the volatile oil and gas industry.

However, the sale will greatly strengthen the company’s financial flexibility, DBRS said.

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