DBRS Confirms Rating of Brookfield Soundvest Split Trust Preferred Securities at Pfd-5 (high)

DBRS Limited (DBRS) confirmed the rating on the Preferred Securities issued by Brookfield Soundvest Split Trust (the Trust) at Pfd-5 (high). The Trust invests in a diversified portfolio of Canadian companies (the Portfolio). Eligible investments of the Trust currently include common shares and preferred shares, income trusts, income securities (including bonds and debentures), real estate investment trusts, Canadian mortgage-backed securities and other equity securities. The Trust may engage in securities lending to generate additional income.

Holders of the Preferred Securities receive fixed quarterly interest payments of $0.15, yielding 6.0% annually on the issue price of $10.00 per security. Holders of capital units of the Trust (the Capital Units) may receive regular monthly cash distributions, subject to the Preferred Security asset coverage ratio being greater than 1.4 times (x). The Capital Unit distributions were suspended in August 2011 as a result of the asset coverage test not being met.

Based on the latest Portfolio yield as at March 2, 2018, the Preferred Securities distribution coverage ratio was approximately 0.4x. The insufficient amount of Portfolio dividends to cover Preferred Security distributions is projected to create an average annual grind on the Portfolio of approximately 3.2% in the next three years. As at March 2, 2018, the downside protection available to the Preferred Securities was approximately 9.7%. The downside protection has remained volatile throughout the past year as it depends on the value of underlying securities of the Portfolio.

Considering the amount of downside protection available to the Preferred Securities and projected grind until the expected end of the term on March 31, 2020, DBRS confirmed the rating on the Preferred Securities issued by the Trust at Pfd-5 (high).

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 under Related Documents or by contacting us at info@dbrs.com.

The principal methodology is Rating Canadian Split Share Companies and Trusts (July 2017), which can be found on dbrs.com under Methodologies.

The rated entity or its related entities did participate in the rating process for this rating action. DBRS had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.

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