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 Preferred Shares) issued by AllBanc Split Corp. (the Company) at Pfd-2. On March 8, 2013, the Company issued 1,177,652 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 were fully redeemed. The final redemption date for both classes of shares is March 9, 2018.

Net proceeds of the offering were used to purchase additional common shares of the Bank of Montreal (rated AA with a Negative trend by DBRS), The Bank of Nova Scotia (rated AA with a Negative trend by DBRS), the Canadian Imperial Bank of Commerce (rated AA with a Negative trend by DBRS), the Royal Bank of Canada (rated AA with a Negative trend by DBRS) and The Toronto-Dominion Bank (rated AA with a Negative trend by DBRS; collectively, the Portfolio). Dividends received on the Portfolio are used to pay a fixed cumulative quarterly distribution to holders of the Preferred Shares, yielding 4.00% annually on the initial issue price of $31.64. Holders of the Capital Shares do not receive a stated regular distribution. They are, however, expected to receive all excess dividend income after the Preferred Shares distributions and other expenses of the Company have been paid.

Downside protection has been building up some positive momentum over the last 12 months, reflecting the improving share prices of the five banks. It stands at about 70.5% as at February 23, 2017. The dividend coverage ratio is approximately 2.1 times.

Given the strong dividend coverage ratio, credit quality of the Portfolio’s underlying shares and improving downside protection amount, DBRS has confirmed the rating of the Preferred Shares issued by the Company at Pfd-2.

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

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