MARK BLINCH
Manulife Financial Corp.'s debt rating has been dropped by DBRS one level to AA (low) from AA, with DBRS saying in its analysis that the company may be forced to go back to the market to get more cash.
Manulife's big loss dropped its key capital ratio enough that "another negative quarter will force the company to raise additional capital."
That is not what equity investors want to hear, after enduring two big share sales in 2008.
DBRS said that Manulife's financial flexibility is "increasingly constrained, as the most readily available sources of capital have already been tapped" -- pointing to the two share issues in 2008 equity raises totalling $5-billion, a halving of the company's dividend, and close to $1.5 billion in debt and preferred share financings.
The result was an increase in "financial leverage ratios to the point where DBRS was no longer comfortable with the Company's pre-existing ratings."
DBRS said that at the new rating level Manulife could issue more debt, rather than having to go to the equity markets, and still keep the ratings intact.