DBRS Updates Methodology for Rating Canadian Split Share Companies and Trusts

DBRS has today released an updated methodology for rating Canadian split share companies and trusts. The publication of this updated methodology is part of DBRS’s continued efforts to provide market participants with updates and insight into the rationale behind DBRS’s rating opinions.

With the release of the updated methodology, DBRS’s approach to rating split share transactions is largely unchanged. The primary rating factors are the downside protection and dividend coverage available to the preferred shares; the credit quality, diversification and volatility of the portfolio; and the size of capital share distributions and net asset value (NAV) level where distributions are suspended.

The updates to the methodology are minor in nature, including changes to the criteria for portfolio holdings, the addition of a currency hedging section and adjustments to other rating factors for assigning initial preferred share ratings and for the surveillance of existing ratings.

The updated methodology includes an additional appendix, with a table summarizing the split share rating process. The inclusion of the methodology summary table is part of DBRS’s ongoing efforts to provide greater transparency to the ratings process.

DBRS has taken no rating actions as a result of the release of the updated methodology.