DBRS Upgrades Preferred Shares/Securities Issued by Four Split Share Vehicles

DBRS has today upgraded the ratings of preferred shares issued by four split share companies and trusts (the Issuers): Energy Split Corporation, Energy Split Corp. II, SNP Split Corp. and Utility Split Trust.

Each of the Issuers has invested in a portfolio of securities (the Portfolio) funded by issuing two classes of shares – dividend-yielding preferred shares or securities (the Preferred Shares) and capital shares or units (the Capital Shares). The main form of credit enhancement available to these Preferred Shares is a buffer of downside protection. Downside protection corresponds to the percentage decline in market value of the Portfolio that must be experienced before the Preferred Shares would be in a loss position. The amount of downside protection available to Preferred Shares will fluctuate over time based on changes in the market value of the Portfolio.

Today’s rating actions reflect upward trends in the net asset value (NAV) of the respective Portfolios over the past eight months. In its surveillance of split share funds, DBRS reviews the historical trends in downside protection and assigns greater weighting to more recent Issuer NAVs.

DBRS will continue to closely monitor changes in the credit quality of these Preferred Shares. The timing of rating actions will generally follow the surveillance guidelines listed in DBRS’s split share methodology, “Rating Canadian Split Share Companies and Trusts.”

Notes:
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.