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  Title	Moody's Ratings affirms Canadian Tire's Prime-2 commercial paper rating
  ID	7248752
  External ID	7577007132
  Author	Unknown
  Published Date	Feb. 24, 2025, 4:15 p.m.
  Summary	Toronto, February 24, 2025 -- Moody's Ratings (Moody's) today affirmed the Prime-2 (P-2) commercial paper rating of Canadian Tire Corp. Ltd. (Canadian Tire). "The P-2 rating affirmation recognizes Can
  Tags	press-release
  URL	https://ratings.moodys.com/ratings-news/437869
  Sentiment	Negative: 0.18579    Neutral: 0.13000    Positive: 0.68421
  Relevance	0.03320

• Content Details

  Content ID	4553998
  Key	41f70e6a-8557-4d9b-af9a-c7f30426b26d
  Content	Toronto, February 24, 2025 -- Moody's Ratings (Moody's) today affirmed the Prime-2 (P-2) commercial paper rating of Canadian Tire Corp. Ltd. (Canadian Tire). "The P-2 rating affirmation recognizes Canadian Tire's solid market position across a number of banners in Canada and its track record of good operational execution in the face of a difficult retail environment", said Moody's Ratings analyst Dion Bate. RATINGS RATIONALE The P-2 rating reflects Canadian Tire's consolidated investment grade credit quality and solid liquidity. Canadian Tire benefits from strong credit profiles in its retail business (CT Retail) and REIT subsidiary (CT REIT), while it is challenged by the weaker credit quality of its financial services business (Canadian Tire Financial Services; CTFS). We project financial leverage (debt/ EBITDA excluding CTFS) to remain around 2.8x in 2025. The announcement to dispose of Helly Hansen for C$1,267 million is expected to be leverage neutral and will provide over C$1 billion of excess cash, offering Canadian Tire flexibility to manage potential downside risks in the event of escalating US and Canadian trade tariffs. CT Retail has Baa characteristics, benefiting from: 1) a diversified and unique mix of banners and products; 2) an omnichannel business model with a large store presence in Canada, enhanced e-commerce platform and growing loyalty program; and 3) a track record of consistent margins despite the strong competition from larger US retailers. CT Retail is constrained by: 1) heightened geopolitical risks associated with the possible escalation of US and Canadian trade tariffs that will likely weaken consumer demand and tighten operating margins; and 2) its modest discretionary product portfolio which is susceptible to shifts in consumer spending. CT REIT has investment grade characteristics, benefiting from the largely unsecured nature of its assets with a market value of around C$7 billion and long term leases with contractual rent escalations accounting for more than 90% of its income. The near-exclusive concentration of leases with Canadian Tire is minimized by the strong credit quality of Canadian Tire. CTFS exhibits non-investment grade characteristics, constrained by: 1) unsecured credit card risk; 2) the undiversified nature of its assets; and 3) lower asset quality and higher levels of confidence-sensitive funding compared to peers. CTFS benefits from: 1) an above peer-average capital ratio; 2) good margins; 3) customer retention from Canadian Tire's loyalty program combined with a close association with CT Retail, a strong retailer with a long-standing customer base. CT Retail's liquidity is good. Sources total C$3.5 billion to December 2025 (post Helly Hansen disposal) with no mandatory cash uses during 2025. Liquidity is supported by C$172.9 million of cash (around C$1.2 billion post Helly Hansen disposal) and equivalents as of December 28, 2024, full availability under its C$1.975 billion revolving credit facilities expiring May 2029 and around C$300 million of expected free cash flow in 2025. We expect Canadian Tire's retail business to remain in compliance with financial covenants over the next 12 months. Canadian Tire's commercial paper program is supported by unrestricted same day availability of funds that can be drawn in Canadian or US dollars under its committed C$1.975 billion revolving credit facility, which backstops its US$1 billion commercial paper program. Canadian Tire's credit facility contains certain provisions that are somewhat unique to Canadian companies which, in our view, are less desirable than their US counterparts. As of December 28, 2024 there was no drawings under CTC's commercial paper program. CT REIT and CTFS are self-sustaining and have liquidity arrangements that are adequate for their needs. The ability to monetize Canadian Tire's equity stakes in CTFS and CT REIT provides increased flexibility for liquidity needs, if required. FACTORS THAT COULD LEAD TO AN UPGRADE OR DOWNGRADE OF THE RATING For Canadian Tire's commercial paper rating to be upgraded to P-1, the company must increase scale materially and its geographical footprint. Furthermore, its Financial Services monoline strategically shifts to more diversified revenue and funding sources. Canadian Tire's commercial paper rating could be downgraded to P-3, if there is a material weakening of liquidity at any of its three business segments; a deterioration in its retail market position, reflected by sustained weakening of comparable sales and declining profitability with EBITDA margins (excluding CTFS) sustained below 10%; or a material deterioration in the bank's credit card portfolio quality or capital levels. Additionally, the rating could be downgraded if debt/EBITDA (excluding CTFS) remains above 3x; or if (EBITDA – capex)/interest expense (excluding CTFS) falls below 4x on a sustained basis. The principal methodology used in this rating was Retail and Apparel published in November 2023 and available at https://ratings.moodys.com/rmc-documents/411013. Alternatively, please see the Rating Methodologies page on https://ratings.moodys.com for a copy of this methodology. Canadian Tire Corp. Ltd., headquartered in Toronto, Ontario, Canada, operates a family of businesses that include Retail (key banners include Canadian Tire; SportChek, Marks, PartSource, Pro Hockey Life and Party City); Financial Services (CTFS; 100% ownership) and a Real Estate Investment Trust (68.4% ownership), which is a unique business model among the North American retailers we rate. REGULATORY DISCLOSURES For further specification of Moody's key rating assumptions and sensitivity analysis, see the sections Methodology Assumptions and Sensitivity to Assumptions in the disclosure form. Moody's Rating Symbols and Definitions can be found on https://ratings.moodys.com/rating-definitions. For any affected securities or rated entities receiving direct credit support/credit substitution from another entity or entities subject to a credit rating action (the supporting entity), and whose ratings may change as a result of a credit rating action as to the supporting entity, the associated regulatory disclosures will relate to the supporting entity. Exceptions to this approach may be applicable in certain jurisdictions. For ratings issued on a program, series, category/class of debt or security, certain regulatory disclosures applicable to each rating of a subsequently issued bond or note of the same series, category/class of debt, or security, or pursuant to a program for which the ratings are derived exclusively from existing ratings, in accordance with Moody's rating practices, can be found in the most recent Credit Rating Announcement related to the same class of Credit Rating. For provisional ratings, the Credit Rating Announcement provides certain regulatory disclosures in relation to the provisional rating assigned, and in relation to a definitive rating that may be assigned subsequent to the final issuance of the debt, in each case where the transaction structure and terms have not changed prior to the assignment of the definitive rating in a manner that would have affected the rating. Moody's does not always publish a separate Credit Rating Announcement for each Credit Rating assigned in the Anticipated Ratings Process or Subsequent Ratings Process. This rating is solicited. Please refer to Moody's Policy for Designating and Assigning Unsolicited Credit Ratings available on its website https://ratings.moodys.com. Regulatory disclosures contained in this press release apply to the credit rating and, if applicable, the related rating outlook or rating review. The Global Scale Credit Rating(s) discussed in this Credit Rating Announcement was(were) issued by one of Moody's affiliates outside the EU and UK and is(are) endorsed for use in the EU and UK in accordance with the EU and UK CRA Regulation. Please see https://ratings.moodys.com for any updates on changes to the lead rating analyst and to the Moody's legal entity that has issued the rating. Please see the issuer/deal page on https://ratings.moodys.com for additional regulatory disclosures for each credit rating. Dion Bate Vice President - Senior Analyst Paresh Chari Associate Managing Director Releasing Office: Moody's Canada Inc. 70 York Street Suite 1400 Toronto, ON M5J 1S9 Canada JOURNALISTS: 1 212 553 0376 Client Service: 1 212 553 1653 © 2025 Moody’s Corporation, Moody’s Investors Service, Inc., Moody’s Analytics, Inc. and/or their licensors and affiliates (collectively, “MOODY’S”). All rights reserved. CREDIT RATINGS ISSUED BY MOODY'S CREDIT RATINGS AFFILIATES ARE THEIR CURRENT OPINIONS OF THE RELATIVE FUTURE CREDIT RISK OF ENTITIES, CREDIT COMMITMENTS, OR DEBT OR DEBT-LIKE SECURITIES, AND MATERIALS, PRODUCTS, SERVICES AND INFORMATION PUBLISHED OR OTHERWISE MADE AVAILABLE BY MOODY’S (COLLECTIVELY, “MATERIALS”) MAY INCLUDE SUCH CURRENT OPINIONS. MOODY’S DEFINES CREDIT RISK AS THE RISK THAT AN ENTITY MAY NOT MEET ITS CONTRACTUAL FINANCIAL OBLIGATIONS AS THEY COME DUE AND ANY ESTIMATED FINANCIAL LOSS IN THE EVENT OF DEFAULT OR IMPAIRMENT. 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  Data Source Name	Quantexa News (#5)
  Data Source Type	news
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