Brookfield Soundvest Rising Distribution Split Trust has released its 1H09 Financials:
The published combined net asset value (the “Combined Net Asset Value”), which refers to the value of a capital unit and a preferred security of the Trust, was $8.52 at December 31, 2008 and increased by 13.4% during the period to $9.66 at June 30, 2009. During the same time frame, the S&P/TSX Capped Income Trust Total Return Index gained 14.5%. The Fund underperformed the index based on net asset value despite generating returns from all four income trust sectors in excess of the overall index. The underperformance is largely due to the net disbursements made from the Fund during the period ended June 30, 2009.
To June 30, 2009, 13,400 capital units and 13,400 preferred securities had been purchased under the NCIB. We continue to be of the opinion that capital units and preferred securities of the Trust may become available during the proposed purchase period at prices that would make such purchases in the best interests of the Trust and its securityholders.
Subsequent to June 30, 2009, an additional 6,500 capital units and 6,500 preferred securities had been purchased under the normal course issuer bid.
Opinions are very nice, but cash is better. The capital units closed yesterday at 0.84-88, 6×2, while the preferreds were at 7.67-75, 1×9. The NAV was 10.46 on August 21 and, if anecdotal memory serves, this discount has been present throughout most of the piece. These guys have been refusing to execute their NCIB in a meaningful manner even with a discount to NAV on the order of 20%!
On October 23, 2008, the Trust announced that it was temporarily suspending the annual redemption rights that would have arisen in November in respect of both its Capital Units and Preferred Securities. The Trust’s Declaration of Trust provides for the suspension of redemptions when the Coverage Ratio cannot be maintained. The Trust is continuing to monitor its net asset value to determine when it will be able to resume redemptions.
This is a rather disingenuously phrased paragraph. The Declaration of Trust allows the manager to suspend redemptions when coverage is below 1.4, but does not stipulate that it must be suspended. Quite frankly, I consider the suspension of redemptions to be rather sharp practice by the Manager … and one reason why the combined units are trading so far below the combined NAV.
The Income Coverage Ratio is a rare piece of cheerful news. Gross Income for the half, excluding “Return of Capital” was 2,517,076; expenses were 431,767 (including Management fees of 275,909 and “General and Administrative” fees of 58,205, “Accounting and Administrative” fees of 16,916 and Directors’ fees of 6,928 … keep milking that cow, boys!); therefore net income was 2,085,309 to cover preferred security interest expense of 1,692,707. The Income Coverage Ratio is therefore 1.2+:1.
The directors signing the fund statements were Jeffrey M. Blidner & George E. Myhal, of Brookfield Investment Funds Management Inc., the Manager of the fund. One may only hope that, in their role as officers of the Manager of the Fund, they did not accept Directors Fees.
BSD.PR.A was last mentioned on PrefBlog when its Credit Trend was revised to “Stable” by DBRS.
BSD.PR.A is tracked by HIMIPref™, but has been relegated to the “Scraps” index due to credit concerns.