Exchange Income Corp. Secures Investment Grade Rating, Eyes Bond Market

Event summary

  • Exchange Income Corporation (EIC) has received a BBB (low) corporate credit rating from Morningstar DBRS, its first ever.
  • The rating reflects the completion of a $425 million convertible debenture redemption over the past 15 months.
  • EIC’s aggregate leverage ratio is at its lowest point in over a decade, with over 90% of debentures converted to equity.
  • The company intends to explore accessing the Canadian corporate bond market to fund future growth initiatives.

The big picture

EIC’s investment grade rating represents a significant maturation of the company’s capital structure, moving it away from reliance on convertible debentures and towards broader access to debt markets. This shift allows EIC to pursue larger acquisitions and contracts within its Aerospace & Aviation and Manufacturing segments, but also introduces new dependencies on broader economic conditions and investor sentiment. The move signals a desire to optimize its cost of capital and provides greater financial flexibility for future growth.

What we're watching

Capital Markets
The success of EIC’s foray into the Canadian corporate bond market will hinge on prevailing interest rates and investor appetite for Canadian corporate debt, potentially impacting financing costs and flexibility.
M&A Strategy
The increased access to capital could accelerate EIC’s acquisition strategy, requiring careful monitoring of deal quality and integration risks to ensure value creation.
Rating Stability
Maintaining the BBB (low) rating will depend on EIC’s continued adherence to a conservative leverage strategy and consistent operational performance, as any deviation could trigger a rating downgrade.