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

DBRS Limited (DBRS) confirmed its rating on the 3.75% Cumulative Redeemable Class A Preference Shares, Series 4 (the Series 4 Preference Shares) issued by Canadian General Investments, Limited (the Company) at Pfd-1 (low). The Series 4 Preference Shares will be retractable at the option of their holders on or after June 15, 2023.

The Company’s portfolio (the Portfolio) is a well-diversified, actively managed portfolio of common shares, which includes approximately 50 to 60 well-known names allocated among eleven major sectors with Materials, Consumer Discretionary, Energy, Information Technology, Industrials and Financials receiving the largest allocation of approximately 91% collectively as at June 1, 2018. Holders of the Series 4 Preference Shares are entitled to cash dividends of $0.9375 per annum (p.a.), yielding 3.75% p.a. on the initial issue price. Holders of the common shares receive quarterly distributions of $0.19 and have generally received a special capital gain dividend at year end.

The Company maintains a $75 million 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 Portfolio.

As of June 4, 2018, the downside protection available to the holders of the Series 4 Preference Shares was approximately 83.3%. Regular distributions to holders of the Company’s common shares, along with the Company’s operational expenses, are projected to cause a portfolio grind of about 3.9% p.a. for the remaining term; however, the strong asset coverage test of six times (x; which is well above the 2.5x, which prevents any distributions to holders of the common shares) provides enough cushion for the Series 4 Preference Shares. The Company generates additional income through particular investment strategies as well as securities lending. Foreign currency investments in the Portfolio are not hedged.

The confirmation of the rating at Pfd-1 (low) is based on the amount of downside protection available and its positive trend, the Portfolio composition and the Company’s overall performance metrics.

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

The principal methodology is Rating Canadian Split Share Companies and Trusts, 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 under Related Documents or by contacting us at info@dbrs.com.

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.

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