Capital Structure

Credit Ratings

Empire Company Limited. is not currently rated by any credit ratings agency. Empire’s subsidiary, Sobeys Inc., is rated by both DBRS Ltd. and Standard & Poor’s (S&P).

The credit ratings accorded to the debt by the rating agencies are not a recommendation to purchase, hold or sell the debt, inasmuch as such ratings do not comment as to market price or suitability for a particular investor. Credit ratings are intended to provide investors with an independent measure of the credit quality of an issue of securities. The Company provides the rating agencies with confidential, in-depth information in support of the rating process.

DBRS’ credit ratings for long-term debt instruments range from AAA to D. The DBRS BBB (low) rating is investment grade and considered of adequate credit quality. The capacity for the payment of a company’s financial obligations is considered acceptable but may be vulnerable to future events. Ratings designations may be modified by the addition of a high or low to indicate relative standing within the BBB category. Each DBRS rating category is appended with one of three rating trends: “positive”, “stable” or “negative”. The rating trend helps to give an investor an understanding of DBRS’ opinion regarding the outlook for the rating in question. However, the investor must not assume that a positive or negative trend necessarily indicates that a rating change is imminent. A positive trend indicates that credit metrics are expected to improve over the next 12 months.

S&P’s credit ratings for long-term debt instruments range from AAA to D. S&P’s BBB- rating is investment grade. An obligation rated BBB exhibits adequate protection parameters. However, adverse economic conditions or changing circumstances are more likely to weaken the obligor's capacity to meet its financial commitments on the obligation. A plus or minus designation indicates the debt’s relative standing within the BBB category. S&P’s rating outlook assesses the potential direction that a rating may be headed over the intermediate term, which is generally up to two years for investment grade and generally up to one year for speculative grade, with outlooks falling into one of four categories: “positive”, “negative”, “stable” or “developing”. A stable outlook indicates credit metrics are expected to remain stable, and a rating is not likely to change in the intermediate term.

The credit ratings on the MTNs and Notes may not reflect the potential impact of all risks related to structure and other factors on the value of the MTNs and Notes. In addition, real or anticipated changes in the Sobeys’ credit ratings will generally affect the market value of the debt. The foregoing ratings may be revised or withdrawn at any time by the rating agency if, in its judgment, circumstances warrant.

Sobeys has made, or will make, payments in the ordinary course to the rating agencies in connection with the assignment of ratings on Sobeys and its securities. In addition, the Company has made customary payments in respect of certain subscription services provided to the Company by the rating agencies.