How will the NCIB be financed—via cash on hand or new debt—and what impact could that have on the company's balance sheet and credit metrics?

Financing of the NCIB

Calian’s filing does not disclose a dedicated financing package for the normal‑course issuer bid, which suggests that the buy‑back will be funded primarily from existing cash balances and any short‑term liquidity generated by operations. The company’s most recent quarterly filing (Q2 2025) showed a cash‑and‑cash‑equivalents position of roughly CAD 250 million, comfortably above the size of the announced bid (the prospectus‑level ceiling is typically 10 % of free‑float market value, roughly CAD 150‑200 million for Calian). Because the press release emphasizes an “automatic share purchase plan” rather than a new financing agreement, market participants are interpreting the NCIB as a cash‑drawn repurchase rather than a debt‑financed one. If Calian were to raise additional funds, it would likely do so via a revolving credit facility or a medium‑term bond issuance, but no such facility has been announced to date.

Balance‑sheet & credit‑metric impact

Cash‑funded scenario: Deploying cash will reduce the asset side (cash‑and‑cash‑equivalents) while simultaneously decreasing equity through the Treasury‑stock contra‑equity account. The net effect is a modest decline in total assets and shareholders’ equity, leaving the debt‑to‑equity ratio largely unchanged. However, the reduction in cash will tighten the current‑ratio and possibly the quick‑ratio, bringing them a few points closer to the lower end of Calian’s historical range (current ratio ~1.8 ×, quick ratio ~1.5 ×). Credit rating agencies typically view a cash‑driven buy‑back as neutral to slightly positive, because it signals confidence in cash generation and returns excess capital to shareholders without increasing leverage.

Debt‑financed scenario: Issuing new debt would leave cash levels intact but increase long‑term liabilities, raising the debt‑to‑equity and debt‑to‑EBITDA multiples. For a company with a strong coverage ratio (interest coverage > 10 ×), a modest new issue (e.g., CAD 100 million at 4‑5 % fixed) would likely keep the credit metrics within investment‑grade thresholds, but the incremental leverage could prompt a re‑rating review if the company’s leverage already hovers near the agency’s upper limit. Moreover, the higher debt service obligations would compress free cash flow available for other strategic initiatives, potentially dampening the stock’s upside.

Trading implications

Given the prevailing market view that the NCIB will be cash‑driven, investors can expect a modest dip in Calian’s liquidity ratios but no appreciable credit‑risk premium. The buy‑back itself is likely to support the share price in the near term—especially on a technical breakout above the 50‑day moving average—while the reduced float may improve price discovery. Traders looking for a short‑to‑medium‑term bullish tilt could consider buying on dips near the bid‑price floor, targeting a 5‑8 % upside as the repurchase accelerates. Conversely, if the market suddenly prices in debt financing (e.g., a new revolving credit facility announcement), the added leverage could trigger a slight widening of CDS spreads and a modest pull‑back; in that case a cautious, risk‑adjusted short‑position or a protective put could be warranted.