DBRS Upgrades Global Champions Split Corp. Class A Preferred Shares, Series 1 to Pfd-2 from Pfd-2 (low)

DBRS Limited (DBRS) has today upgraded the rating of the Class A Preferred Shares, Series 1 (the Preferred Shares) issued by Global Champions Split Corp. (the Company) to Pfd-2 from Pfd-2 (low). The Company issued 2,000,000 Preferred Shares at an issue price of $25.00 per Preferred Share and an equal number of capital shares (the Capital Shares) on March 7, 2013. The redemption date for the Preferred Shares will be on or about July 31, 2019.

Net proceeds from the initial offering were used to invest in a portfolio of common shares of 15 international large capitalization companies (the Portfolio). The Portfolio was initially equally weighted and may be changed from time to time. The Company makes quarterly fixed cumulative distributions of $0.25 per Preferred Share, yielding 4.00% per annum on the issue price. Based on the dividend yields on the Portfolio and foreign exchange rates as of February 24, 2015, the current dividend coverage ratio (net of expenses) is approximately 1.3 times. Holders of the Capital Shares are expected to receive all excess income after Company expenses and Class A Preferred Share distributions have been paid.

The Portfolio may be comprised of non-U.S. dollar denominated securities. The Company intends to substantially hedge all of the Portfolio’s investments denominated in currencies other than the U.S. dollar back to U.S. dollars. Dividends received on the Portfolio securities denominated in currencies other than U.S. dollars are currently being hedged back to U.S. dollars, but the Company is not required to do so. Distributions to holders of the Preferred Shares are denominated in Canadian dollars and are hedged back to U.S. dollars unless the net asset value (NAV) of the Company is less than the aggregate original issue price of the Class A Preferred Shares.

On March 7, 2014, DBRS confirmed the rating of the Preferred Shares at Pfd-2 (low) mainly based on the sufficient downside protection available to holders of the Preferred Shares. Since then, the NAV of the Company (after adjusting for exchange rates) has increased, with downside protection increasing from 52% to 61% and remaining with a positive trend over the past few months. As a result, the rating of the Class A 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 (July 2014), 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.

Going forward, DBRS will not provide rating reports for Split Shares companies that are being reviewed for surveillance purposes. This change will be made in an effort to provide more concise and meaningful updates. A rating report will continue to be published for initial fund ratings, reorganizations and extensions.