DBRS Confirms the Rating of Pfd-2 on NewGrowth Corp. Class B Preferred Shares, Series 3

DBRS Limited (DBRS) has today confirmed the rating of Pfd-2 on the Class B Preferred Shares, Series 3 (the Series 3 Preferred Shares) issued by NewGrowth Corp. (the Company). Approximately 2.6 million Series 3 Preferred Shares were issued on June 26, 2014, following the redemption of the previously outstanding Class B Preferred Shares, Series 2 (the Series 2 Preferred Shares) in accordance with their original terms as part of a share capital reorganization. The final redemption date for the Series 3 Preferred Securities is June 26, 2019.

The net proceeds from the issuance of the Series 3 Preferred Securities, after paying all expenses, issuance costs and redeeming all previously outstanding Series 2 Preferred Securities, were used by the Fund to acquire additional securities in the Fund’s portfolio (the Portfolio) in accordance with the Fund’s investment objectives, strategy and restrictions. The Portfolio consists of the common shares of 19 Canadian issuers in the banking, telecommunications, pipeline, utility and oil and gas sectors.

Since the rating was assigned in June 2014, Fund performance has been generally stable, with downside protection available to holders of the Series 3 Preferred Securities fluctuating between 51% and 56%. As of June 4, 2015, the downside protection available to the portfolio is approximately 52.16%. Dividends received on the Portfolio are used to pay a fixed cumulative quarterly distribution yielding 4.15% annually on the initial issue price to holders of the Series 3 Preferred Shares. Holders of the Capital Shares receives all excess dividend income after the Series 3 Preferred Share dividends and other expenses of the Company have been paid. Based on the current dividend yield on the Portfolio, the Series 3 Preferred Share dividend coverage ratio is approximately 1.75 times. As a result, DBRS has confirmed the rating of the Series 3 Preferred Shares at Pfd-2.

The main constraints to the rating are as follows:

(1) The downside protection available to holders of the Series 3 Preferred Shares is dependent on the value of the common shares held in the Portfolio.

(2) Changes in dividend policies of the companies included in the Portfolio may result in reductions in Series 3 Preferred Share dividend coverage or downside protection from time to time.

The scheduled final maturity date of the Series 3 Preferred Shares is June 26, 2019.

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 2014), which can be found on our website under Methodologies.

For more information on this credit or on this industry, visit www.dbrs.com or contact us at info@dbrs.com.