DBRS Confirms NewGrowth Corp. Class B Preferred Shares, Series 3 at Pfd-2

DBRS Limited (DBRS) has today confirmed the rating of Pfd-2 on the Class B Preferred Shares, Series 3 (the Series 3 Preferred Shares) issued by NewGrowth Corp. (the Company). Approximately 2.6 million Series 3 Preferred Shares were issued on June 26, 2014, following the redemption of the previously outstanding Class B Preferred Shares, Series 2 (the Series 2 Preferred Shares) in accordance with their original terms as part of a share capital reorganization. The final redemption date for the Series 3 Preferred Shares is June 26, 2019.

The Fund used the net proceeds from the Series 3 Preferred Share issuance to acquire additional securities in its portfolio (the Portfolio) in accordance with the Fund’s investment objectives, strategy and restrictions. The Portfolio currently consists of the common shares of 18 Canadian issuers in the banking, telecommunications, pipeline, utility and oil and gas sectors.

As of May 4, 2017, the downside protection available to holders of the Series 3 Preferred Shares was approximately 57%. Dividends received on the Portfolio are used to pay a fixed cumulative quarterly distribution yielding 4.15% annually on the initial issue price to holders of the Series 3 Preferred Shares. Holders of the Capital Shares may receive dividend income after the Company’s Series 3 Preferred Share dividends and other expenses have been paid. Based on the Portfolio’s current dividend yield, the Series 3 Preferred Share dividend coverage ratio is approximately 1.6 times. Considering the level of the downside protection available, the amount of dividend coverage and the Portfolio composition, DBRS has confirmed the rating of the Series 3 Preferred Shares at Pfd-2.

The main constraints to the rating are:
(1) The downside protection available to holders of the Series 3 Preferred Shares is dependent on the value of the common shares held in the Portfolio.

(2) Changes in dividend policies of the companies included in the Portfolio may result in reductions in Series 3 Preferred Share dividend coverage or downside protection from time to time.

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.