Gov’t plans don’t impact CWB credit ratings, yet: Moody’s

The federal government’s plans to strip the Canadian Wheat Board of its single marketing desk for Prairie wheat, durum and barley have no impact — yet — on the board’s credit ratings, according to Moody’s.

The CWB’s current ratings of Aaa senior and P-1 short-term are supported by the “unconditional and irrevocable guarantee” of its current debt programs by the federal government under the terms of the Canadian Wheat Board Act, the prominent New York credit rating and risk analysis agency said Wednesday.

That said, Moody’s added, “if the change in CWB’s status results in lower levels of government support for future debt programs, these future programs would likely be rated several notches below CWB’s current ratings.”

“The loss of its grain marketing monopoly is clearly negative in terms of the CWB’s stand-alone credit profile, but the impact for bondholders is mitigated by the continuing protection provided by the unconditional and irrevocable government guarantee,” William Burn, Moody’s Toronto-based lead analyst on the CWB file, said in a release.

The details of the government’s proposed legislation aren’t yet available and it’s not clear how the CWB will continue to operate after the current marketing system is wound down, Moody’s noted.

As it now stands, however, the CWB distributes all its earnings to farmers and thus relies on the government guarantee to support its borrowings, Moody’s said.

Moody’s last affirmed the CWB’s ratings at the end of June 2005.

The federal government, using its newfound majority status after last month’s general election, said in May it plans to pass legislative changes to the CWB’s marketing powers to take effect for the beginning of the 2012-13 crop year in August 2012.

Related stories:

Wheat, barley single desks to end together: CWB, June 1, 2011

Tories aim to end CWB single desk in 2012, May 18, 2011

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