DBRS Places Big 8 Split Inc. Class B Preferred Shares, Series 1 Under Review with Negative Implications
Split Shares & FundsDBRS has today placed the Pfd-2 (high) rating of the Class B Preferred Shares, Series 1 (the Class B Preferred Shares) issued by Big 8 Split Inc. (the Company) Under Review with Negative Implications.
The Company currently has 1,204,980 Class B Preferred Shares and an equal number of Class A capital shares (the Capital Shares) outstanding. The Class B Preferred Shares receive a fixed cumulative quarterly distribution yielding 7.00% annually on the issue price of $12 per share. The scheduled final maturity date of the Class B Preferred Shares is December 15, 2013.
The Company has filed a preliminary prospectus for the issuance of Class C Preferred Shares, Series 1 (the Class C Preferred Shares; collectively, with the Class B Preferred Shares, the Preferred Shares) and additional Capital Shares. The Company intends to declare and pay a dividend in Capital Shares to the current holders of the Capital Shares. The Company will then offer to issue a greater amount of Class C Preferred Shares than Capital Shares so that there will be an equal number of Capital Shares and Preferred Shares of the Company outstanding. The Class C Preferred Shares will rank pari passu with the Class B Preferred Shares with respect to return of principal and payment of dividends.
As of October 22, 2009, the net asset value (NAV) of the Company was $42.01 per unit, providing downside protection of approximately 71% to the Class B Preferred Shares. The re-leveraging of the Company described above at the time of issuance of the Class C Preferred Shares and additional Capital Shares will result in a lower amount of downside protection being available to the Class B Preferred Shares. Consequently, the rating on the Class B Preferred Shares has been placed Under Review with Negative Implications. Once the Class C Preferred Shares are issued, the Preferred Shares will benefit from the same amount of downside protection. Based on information received from TD Sponsored Companies Inc. (the Administrator and Promoter of the Company) to date, it is expected that the rating on the Class B Preferred Shares will be downgraded to Pfd-2 upon completion of the issuance of Class C Preferred Shares and additional Capital Shares.
DBRS will continue to monitor the status of the Class B Preferred Shares and will provide rating updates as required.
Notes:
All figures are in Canadian dollars unless otherwise noted.
The applicable methodology is Rating Canadian Split Share Companies and Trusts, which can be found on our website under Methodologies.
This is a Structured Finance rating.