DBRS Places Ratings of Faircourt Split Trust and Income & Growth Split Trust Under Review with Developing Implications

DBRS has today placed the Pfd-4 (high) rating of the Preferred Securities issued by Income & Growth Split Trust (FIG) and the Pfd-3 rating of the Preferred Securities issued by Faircourt Split Trust (FCS) Under Review with Developing Implications.

FIG and FCS are split share vehicles that have issued preferred securities and capital units and have invested their proceeds in portfolios of income trusts and dividend-paying equity securities. The FIG and FCS investment portfolios currently provide 23% and 35% of downside protection to their preferred securityholders, respectively (as of August 17, 2010). FIG is scheduled to terminate on December 31, 2014, and FCS is scheduled to terminate on March 31, 2011.

Faircourt Asset Management Inc. (Faircourt) is the manager for both FIG and FCS. On August 18, 2010, Faircourt announced that shareholder meetings will be held for both funds on September 13, 2010. Holders of the preferred securities and capital units will be asked to vote on a proposal to merge the two funds into a single trust. As part of the merger, the preferred securityholders of FIG would exchange their current securities for a new class of preferred securities of the new trust. Preferred securityholders and capital unitholders of FCS will vote on amendments to the FCS declaration of trust and trust indenture.

The merger is being proposed by Faircourt to adapt to the impending changes in the taxation of income trusts, which has affected the ability of FCS and FIG to adhere to their investment restrictions. The new trust would have an expanded mandate to invest in a wider range of securities.

Following the Faircourt announcement, DBRS has placed the preferred securities ratings of FCS and FIG Under Review with Developing Implications. DBRS will provide further updates as additional details are released on the potential merger of the funds.

Note:
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.