PrefBlog

A place to stand and a place to owe! Ontari-ari-ari-o was downgraded by DBRS to AA(low) from AA:

Based on the Q2 2009 update, the Province is now looking at a deficit of nearly $32 billion or 5.6% of GDP for this year on a DBRS-adjusted basis (including capital expenditures on a pay-as-you-go basis rather than as amortized), up 50% from the forecast available at the time of the budget. This also marks a notable deterioration from the Q1 2009 update released last June, which captured the effect of the auto sector bailout and rapidly declining tax revenues and led DBRS to change its trend on the long-term rating to Negative from Stable. The latest revisions are primarily the result of dampening tax collection due in part to the ongoing recession, and increased pressure on social program spending. Faced with a weaker-than-expected tax base, the Province has also trimmed its medium-term outlook, with DBRS-adjusted shortfalls of $27 billion to $30 billion now expected for the next two years, up from previous estimates of $17 billion to $21 billion.

Total debt as measured by DBRS is now projected to increase by 22% in 2009-2010 alone, and by 11% to 14% over the following two fiscal years. This will in turn boost Ontario’s debt-to-GDP-ratio from 29% at March 31, 2009, to approximately 37% by fiscal year-end, the third-highest level of all provinces, and to a peak as high as 43% by 2011-2012, well in excess of the level recorded at the onset of the early 1990s recession.

Thank you, Mike, Ernie & Dalton! Amidst all the partisan tumult in Queen’s Park, it is a pleasure to see all the cooperation you guys have exhibited in trashing the provincial finances. Fortunately, however, the Great Leap Forward will not be affected.

Another down-day for preferreds, with PerpetualDiscounts down 4bp and FixedResets down 17bp. Volume continue to be strong, with a preponderance of FixedResets in the volume highlights table.

This entry was posted on Thursday, October 22nd, 2009 at 9:27 pm and is filed under Market Action. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.