DBRS Confirms Canadian General Investments, Limited Preference Shares, Series 4 at Pfd-1 (low)

DBRS Limited (DBRS) has today confirmed the rating of the 3.75% Cumulative Redeemable Class A Preference Shares, Series 4 (the Preference Shares, Series 4) issued by Canadian General Investments, Limited (the Company) at Pfd-1 (low). This confirmation is in relation to the redemption of its $75 million 3.9% Cumulative Redeemable Class A Preference Shares, Series 3. The aggregate amount of $75,697,200 (including accrued and unpaid dividends from March 15, 2016, to, but excluding, June 10, 2016) was funded primarily through the Company’s $75,000,000 secured credit facility with a Canadian chartered bank (the Bank). The Bank holds a security interest in the Company’s portfolio assets. Loan interest and principal payments rank in priority to any other distributions from the Company’s portfolio (the Portfolio). The last rating review was completed on May 13, 2016, when the rating on the Preference Shares, Series 4 was confirmed at Pfd-1 (low).

The Company holds a well-diversified portfolio of common shares that includes about 57 well-known names allocated among ten major sectors, with financials, energy, materials, industrials and consumer discretionary receiving collectively the largest allocation. Holders of the Preference Shares, Series 4 are entitled to cash dividends of $0.9375 per annum, yielding 3.75% per annum on the initial issue price. Holders of the common shares have been receiving quarterly distributions of $0.16 and have generally received a special capital gains dividend at year end. The scheduled maturity of the Preference Shares, Series 4 is June 15, 2023, with seven years remaining in the term.

As of June 10, 2016, the downside protection available to the Preference Shares, Series 4 is approximately 77.5%. Regular distributions to holders of the common shares of the Company and loan facility payments will cause a portfolio grind of about 3.98% per annum for the remaining term. However, the current asset coverage test is 4.4 times, well above the 2.5 times that prevents any distributions to holders of the common shares. Considering the amount of downside protection, the Portfolio composition and the term until maturity, DBRS has confirmed the rating of Pfd-1 (low) on the Preference Shares, Series 4 issued by Canadian General Investments, Limited.

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.