Drop in traffic, revenue triggers change in credit rating agency's view of B.C. Ferries
by Andrew DuffyA massive drop in traffic and revenue has triggered a credit rating agency to change its view of B.C. Ferries.
DBRS Morningstar has changed B.C. Ferries’ trend to negative from stable, though it confirmed the corporation’s credit rating as A (high).
The agency cited the significant impact of the COVID-19 pandemic and the uncertainty surrounding the pace of recovery in downgrading the trend of B.C. Ferries’ issuer and senior secured bonds ratings.
When asked what effect this would have on B.C. Ferries, spokeswoman Deborah Marshall said the corporation was facing an unprecedented drop in traffic and revenue. She also noted that earlier this month S&P Global affirmed Ferries’ credit rating at AA- and also revised the outlook from stable to negative.
“These rating actions reflect the forecasted impact to the company’s financial performance for the fiscal of COVID-19, while recognizing the company’s current healthy cash position and strength to cover all financial obligations in the year, along with its strong enterprise risk and financial risk profile,” Marshall said. “It is expected both will continue to monitor and revisit these ratings as we all respond and recover from the pandemic.”
B.C. Ferries has said it is losing between $1.25 million and $1.5 million each day during the pandemic with traffic levels cut by as much as 80 per cent.
Still, Marshall said the corporation expects to emerge from the pandemic in relatively good shape.
“While the scope and scale of the pandemic has exceeded the scenario planning of most transportation entities across North America and around the world, B.C. Ferries’ historically strong financial performance means B.C.’s coastal ferry system is positioned to potentially emerge from the effects of the pandemic more favourably than similar transportation entities,” she said.
In its statement, DBRS said B.C. Ferries is expected to have cash to cover all of its financial obligations in the coming fiscal year, and that it expects to revise its rating to stable when traffic volume recovers.
The rating agency said it expects traffic could recover significantly by the third quarter of this year.