DBRS Confirms Pfd-2 Rating on Class A Preferred Shares, Series 1 issued by Global Champions Split Corp.

DBRS Limited (DBRS) has today confirmed the rating of the Class A Preferred Shares, Series 1 (the Preferred Shares) issued by Global Champions Split Corp. (the Company) at Pfd-2. 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) and currently consisting of 16 companies. The Portfolio may comprise non-U.S. dollar denominated securities. Portfolio investments denominated in currencies other than the U.S. dollar are hedged 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.

The Company makes quarterly fixed cumulative distributions of $0.25 per Preferred Share, yielding 4.00% per annum on the issue price. 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. Based on the dividend yields on the Portfolio and foreign exchange rates as of February 24, 2016, the current dividend coverage ratio is approximately 1.3 times. Holders of the Capital Shares are expected to receive all excess income after the Company’s expenses and Class A Preferred Share distributions have been paid.

As of February 24, 2016, the downside protection available to the Preferred Shares is 61.4% based on the NAV of $64.75 after considering the exchange rate adjustment.

Some particular strengths of the Company are adequate diversification of the Portfolio with strong credit quality of the underlying companies and consistency of dividend distributions of the companies in the Portfolio.

The stability of the downside protection and strong portfolio metrics are supportive of the rating of Pfd-2 on the Preferred Shares issued by the Company.

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 2015), 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.