DBRS Confirms Rating of Dividend 15 Split Corp. II Preferred Shares at Pfd-3 (low)

DBRS has today confirmed the rating of the Preferred Shares issued by Dividend 15 Split Corp. II (the Company) at Pfd-3 (low). In November and December of 2006, the Company issued 5.6 million Preferred Shares (at $10 each) and an equal number of Class A Shares (at $15 each). The final redemption date for both classes of shares issued is December 1, 2019 (extended from December 1, 2014, at a special meeting of shareholders on June 3, 2013).

The Company holds a portfolio of common shares listed on the Toronto Stock Exchange (the Portfolio), which are issued by the following 15 companies: Bank of Montreal, Bank of Nova Scotia, BCE Inc., CI Financial Corp., Canadian Imperial Bank of Commerce, Enbridge Inc., Manulife Financial Corporation, National Bank of Canada, Royal Bank of Canada, Sun Life Financial Inc., TELUS Corporation, Thomson Reuters Corporation, The Toronto-Dominion Bank, TransAlta Corporation and TransCanada Corp. Up to 15% of the net asset value (NAV) of the Portfolio may be invested in equity securities of issuers other than the above companies. The Portfolio is actively managed by Quadravest Capital Management Inc. Each underlying company in the Portfolio generally represents no less than 4% and no more than 8% of the NAV of the Company.

Since the last rating confirmation in September 2013, the net asset value (NAV) of the Company has been increasing. As of December 31, 2013, the downside protection available to the Preferred Shares is approximately 40.2%, and the dividend coverage ratio is 0.82 times. The Pfd-3 (low) rating of the Preferred Shares is based primarily on the downside protection available and the additional protection provided by an asset coverage test, which does not permit any distributions to holders of the Class A Shares if the NAV of the Company falls below $15.

Notes:
All figures are in Canadian dollars unless otherwise noted.

The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link to the right under Related Research or by contacting us at info@dbrs.com.

The applicable methodology is Rating Canadian Split Share Companies and Trusts (July 2013), which can be found on our website under Methodologies.