Moody's lowers Dollarama to SGL-3

Moody's Investors Service said it lowered Dollarama Group Holdings LP's speculative-grade liquidity rating to SGL-3 from SGL-2, indicating adequate rather than good liquidity, and affirmed the corporate family and probability-of-default ratings at B1 and the senior subordinated bonds at B3 (LGD5, (loss-given-default rate changed to 83% from 84%).

Dollarama Group LP's senior secured bank credit facility was affirmed at B1 (LGD2, loss-given-default rate changed to 17% from 19%), and its senior subordinated bonds were affirmed at B2 (LGD4, loss-given-default rate changed to 61% from 63%).

The outlook is stable.

The lowering of the liquidity rating signals Moody's belief that pre-defined covenant step-downs in the group's bank facility will cause the company to operate with reduced, albeit adequate, headroom to its bank covenants through much of the next year.

The agency said the SGL-3 rating is supported by its expectation that Dollarama is likely to generate free cash flow through the next year comfortably in excess of its $25 million in current debt maturities and maintain full access to its $75 million unused revolver.

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