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

DBRS Limited (DBRS) 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). The Company invests in a portfolio (the Portfolio) of common shares of 18 Canadian issuers. As of December 26, 2018, the Portfolio included the following sectors: financial services (37.2%), utilities (22.9%), communication services (21.1%) and energy (18.8%). On February 6, 2019, the Company announced that it would redeem all outstanding Series 3 Preferred Shares and Capital Shares in accordance with their terms on June 26, 2019, and that it would wind up as soon as practical after that.

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 Shares dividends and other expenses have been paid. Based on the Portfolio’s current dividend yield, the Series 3 Preferred Shares dividend coverage ratio is approximately 2.1 times. As of May 2, 2019, the downside protection available to holders of the Series 3 Preferred Shares was approximately 59%. DBRS’s confirmation of the rating is based on the level of the downside protection available, the amount of dividend coverage, time remaining until maturity and the Portfolio composition.

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 Shares dividend coverage or downside protection from time to time.

Notes:
The principal methodology is Rating Canadian Split Share Companies and Trusts, which can be found on dbrs.com under Methodologies & Criteria.

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.

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