DBRS Morningstar Confirms George Weston Limited at BBB, Stable

DBRS Limited (DBRS Morningstar) confirmed the Issuer Rating and Notes & Debentures rating of George Weston Limited (George Weston or the Company) at BBB and its Preferred Shares rating at Pfd-3, all with Stable trends. The confirmations are concurrent with DBRS Morningstar’s confirmation of Loblaw Companies Limited’s (Loblaw) ratings at BBB (high) (see the DBRS Morningstar press release dated May 18, 2023) as well as its confirmation of Choice Properties Real Estate Investment Trust’s (Choice) rating at BBB (high) (see the DBRS Morningstar press release dated June 22, 2023).

The confirmations of George Weston’s ratings are based on (1) the Company’s position as the holding company of Choice (approximately 61.7% ownership), (2) the Company’s position as the holding company of Loblaw (approximately 52.6% ownership), and (3) the quality of the Company’s liquidity profile. DBRS Morningstar primarily bases George Weston’s ratings on a weighted-average subsidiary rating (WASR) of BBB (high) based on the respective contributions of Loblaw and Choice to George Weston’s cash flows, through dividends and distributions, and adjusted for George Weston’s ownership interest in each entity, after which a one-notch penalty for structural subordination is applied. DBRS Morningstar combines this with an assessment of George Weston’s liquidity profile, which DBRS Morningstar views as strong for the BBB rating.

DBRS Morningstar notes that, as long as the ratings on Loblaw and Choice are BBB (high), the ratings on George Weston, as a pure holding company, would effectively be capped at the BBB level because of the structural subordination. Conversely, although unlikely, George Weston's ratings could be downgraded if DBRS Morningstar downgraded Loblaw and Choice or should George Weston’s nonconsolidated debt levels exceed 20% of nonconsolidated capital, which may result in the one-notch differential between the subsidiaries, Loblaw and Choice, and George Weston being inadequate.

DBRS Morningstar expects that, after satisfying interest expenses, taxes, and other corporate expenses at George Weston, the Company will continue to use the contributions received from Loblaw and Choice, in combination with proceeds from the participation in Loblaw’s share repurchase program, for returns to shareholders through dividends and share repurchases.

For details on Choice’s and Loblaw's credit risk profile and operating performance, please reference the respective press releases and rating reports, which can be found on dbrsmorningstar.com.

ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance factor(s) that had a significant or relevant effect on the credit analysis.

A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework can be found in the DBRS Morningstar Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://www.dbrsmorningstar.com/research/396929 (May 17, 2022).

Notes:
All figures are in Canadian dollars unless otherwise noted.

DBRS Morningstar applied the following principal methodologies:
-- DBRS Morningstar Global Criteria: Rating Corporate Holding Companies and Parent/Subsidiary Rating Relationships (October 26, 2022) https://www.dbrsmorningstar.com/research/404334
-- Global Methodology for Rating Companies in the Merchandising Industry (September 2, 2022) https://www.dbrsmorningstar.com/research/402334
-- Global Methodology for Rating Entities in the Real Estate Industry (April 11, 2023) https://www.dbrsmorningstar.com/research/412477
-- DBRS Morningstar Global Criteria: Preferred Share and Hybrid Security Criteria for Corporate Issuers (October 20, 2022) https://www.dbrsmorningstar.com/research/404248

The credit rating methodologies used in the analysis of this transaction can be found at: https://www.dbrsmorningstar.com/about/methodologies.

A description of how DBRS Morningstar analyzes corporate finance transactions and how the methodologies are collectively applied can be found at: https://www.dbrsmorningstar.com/research/397223/interplay-of-global-corporate-finance-rating-methodologies-when-analyzing-corporate-finance-transactions

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.

The rating was initiated at the request of the rated entity.

The rated entity or its related entities did participate in the rating process for this rating action.

DBRS Morningstar had access to the accounts, management and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

This is a solicited credit rating.

The conditions that lead to the assignment of a Negative or Positive trend are generally resolved within a 12-month period. DBRS Morningstar trends and ratings are under regular surveillance.

Information regarding DBRS Morningstar ratings, including definitions, policies, and methodologies, is available on www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.

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