DBRS Upgrades AllBanc Split Corp. Class C Preferred Shares, Series 1 to Pfd-2 from Pfd-2 (low)

DBRS has today upgraded the rating of the Class C Preferred Shares, Series 1 (the Class C Preferred Shares), issued by AllBanc Split Corp. (the Company) to Pfd-2 from Pfd-2 (low). On March 8, 2013, the Company issued 1,177,652 Class C Preferred Shares and 560,000 Class A Capital Shares (the Capital Shares) as part of a share capital reorganization, where all previously outstanding Class B Preferred Shares, Series 1 were fully redeemed. The final redemption date for the both classes of shares is March 8, 2018.

Net proceeds of the offering were used to purchase additional common shares of Bank of Montreal, The Bank of Nova Scotia, Canadian Imperial Bank of Commerce, Royal Bank of Canada and The Toronto-Dominion Bank (the Portfolio). Dividends received on the Portfolio are used to pay a fixed cumulative quarterly distribution to holders of the Class C Preferred Shares, yielding 4.00% annually on the initial issue price of $31.64. Increases in the dividend distribution policies of the underlying banks in the past year have boosted the dividend coverage ratio to 2.6 times. Holders of the Capital Shares are expected to receive all excess dividend income after the Class C Preferred Share distributions and other expenses of the Company have been paid.

The net asset value of the Company initially fell shortly after issuance, but has been generally increasing since the end of June 2013. Downside protection rose from 51.5% on June 20, 2013, to 60.2% on November 21, 2013, and has been fluctuating around 59% since then. As a result, the rating of the Class C Preferred Shares has been upgraded to Pfd-2 from Pfd-2 (low).

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

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

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.