DBRS Updates Ratings for Preferred Shares/Securities Issued by Three Split Share Vehicles

DBRS has today updated the ratings of preferred shares issued by three split share companies and trusts (the Issuers): Energy Split Corporation, SNP Split Corp. and Utility Split Trust. The preferred shares of Energy Split Corporation have been upgraded to Pfd-3 from Pfd-3 (low), and the preferred shares/securities of SNP Split Corp. and Utility Split Trust have been confirmed at Pfd-3 (high) and Pfd-2 (low), respectively.

Each of the Issuers has invested in a portfolio of securities funded by the issuance of two classes of shares – dividend-yielding preferred shares (or securities) and capital shares (or units). The main form of credit enhancement available to preferred shares is a buffer of downside protection. Downside protection corresponds to the percentage decline in market value of a 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 generally upward trends in the net asset value (NAV) of the respective portfolios over the past year. In its surveillance of split share funds, DBRS reviews historical trends in downside protection and assigns greater weighting to more recent Issuer NAVs. Each of the Issuers has a scheduled termination date in 2011.

DBRS will continue to closely monitor changes in the credit quality of these Issuers. 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.

The full reports providing additional analytical detail are available by clicking on the links below or by contacting us at info@dbrs.com.