DBRS Downgrades Big 8 Split Inc. Class B Preferred Shares, Series 1 to Pfd-2

DBRS has today downgraded the rating of the Class B Preferred Shares, Series 1 (the Class B Preferred Shares) issued by Big 8 Split Inc. (the Company) to Pfd-2 from Pfd-2 (high). This action removes the rating from Under Review with Negative Implications, where it was placed on October 29, 2009. The Class B Preferred Shares have been downgraded as a result of a re-leveraging of the Company. Prior to the re-leveraging, there were 1,067,005 Class B Preferred Shares and an equal number of Class A Capital Shares (the Capital Shares) outstanding. The Company declared and paid a dividend in Capital Shares to the current holders of the Capital Shares (0.6 Capital Shares for each Capital Share outstanding). The Company subsequently issued 1,165,203 new Class C Preferred Shares at $12 each and 525,000 additional Capital Shares at $20 each through a public offering. A greater number of Class C Preferred Shares were issued so that an equal number of Capital Shares and Preferred Shares of the Company would remain outstanding following the Capital Share dividend payment. The Class C Preferred Shares rank pari passu with the Class B Preferred Shares with respect to return of principal and payment of dividends.

The Company has not completed a rebalancing of its portfolio (the Portfolio), maintaining the current weightings of the underlying holdings (8% to 15% for each company). The Portfolio consists of common shares of Bank of Montreal, Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada, The Toronto-Dominion Bank, Great-West Lifeco Inc., Manulife Financial Corporation and Sun Life Financial Inc.

Since the Class B Preferred Shares rank equal with the newly issued Class C Preferred Shares, all Preferred Shares of the Company will benefit from the same amount of downside protection. Following the completion of the re-leveraging, the downside protection available to the Preferred Shares has decreased from 71% to approximately 60% (after offering expenses). The rating on the Class B Preferred Shares has been downgraded to Pfd-2 to reflect the lower amount of downside protection available.

The scheduled final maturity date of the Class B Preferred Shares is December 15, 2013.

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.