DBRS Confirms AllBanc Split Corp. Class C Preferred Shares, Series 1 at Pfd-2

DBRS Limited (DBRS) has today confirmed the rating of the Class C Preferred Shares, Series 1 (the Class C Preferred Shares), issued by AllBanc Split Corp. (the Company) at Pfd-2. 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, in which all previously outstanding Class B Preferred Shares, Series 1 were fully redeemed. The final redemption date for the both classes of shares is March 9, 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. The five banks continued with the regular increases in the dividend distribution policies in 2015, which had brought the dividend coverage ratio to 2.39 times as of February 25, 2016. Holders of the Capital Shares do not receive a stated regular distribution. They are, however, expected to receive all excess dividend income after the Class C Preferred Share distributions and other expenses of the Company have been paid.

In the past twelve months, decreasing share prices of the five banks had a reflection on the net asset value of the Company, bringing overall the downside protection to 58.7% as of February 25, 2016, down from 62.6% a year ago. Nevertheless, the downside protection has demonstrated relative stability over the past year. Given a strong dividend coverage ratio, credit quality of the underlying shares and the downside protection level, DBRS confirms the rating of the Class C Preferred Shares at Pfd-2.

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

The applicable methodology is Rating Canadian Split Share Companies and Trusts (July 2015), 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.