DBRS Upgrades Rating on Class A Preferred Shares, Series 1 Issued by Global Champions Split Corp. to Pfd-2 (high) from Pfd-2

DBRS Limited (DBRS) has today upgraded the rating on the Class A Preferred Shares, Series 1 (the Class A Preferred Shares) issued by Global Champions Split Corp. (the Company) to Pfd-2 (high) from Pfd-2. The Company issued 2,000,000 Class A 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 Class A 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), which currently consists of 16 companies. The Portfolio may comprise non-U.S.-dollar-denominated securities. The Portfolio investments denominated in currencies other than U.S. dollars 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 Class A Preferred Share, yielding 4.00% per annum on the issue price. Distributions to holders of the Class A 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 latest dividend yield on the Portfolio and foreign exchange rates, the dividend coverage ratio is approximately 1.6 times. Holders of the Capital Shares are expected to receive all excess income after the Company’s expenses and the Class A Preferred Share distributions have been paid.

As at February 23, 2017, the downside protection available to the Class A Preferred Shares was approximately 65.5% based on the NAV of $72.42 after accounting for exchange rate adjustment.

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

Considering the stability and growth of the downside protection as well as strong Portfolio metrics, DBRS has upgraded the rating on the Class A Preferred Shares issued by the Company to Pfd-2 (high) from Pfd-2.

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 principal methodology is Rating Canadian Split Share Companies and Trusts (June 2016), which can be found on dbrs.com under Methodologies.

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