PrefBlog

Split Yield Corporation (managed by Quadravest) has announced:

Notice of Final Redemption of all Shares Effective February 1, 2012

Split Yield Corporation (the”Company” hereby provides formal notice that all of its outstanding Class I Preferred shares (YLD.PR.A), Class II Preferred shares (YLD.PR.B) and Capital shares (YLD) will be redeemed effective February 1, 2012. This redemption is required by and will occur in accordance with the provisions of the Company’s articles of incorporation, as amended, and has previously been discussed in the Company’s annual information form, financial statements and other continuous disclosure documents filed earlier this year.

As more fully described in the Company’s annual information form, financial statements and other continuous disclosure documents, the Class I Preferred shares rank in priority to the Class II Preferred shares and the Class II Preferred shares rank in priority to the Capital shares with respect to the payment of dividends and repayment of capital upon the winding up of the Company. The final formula to calculate the termination payment is as follows: Each Class I Preferred share will be valued at the lesser of (i) $20; and (ii) the Net Assets per unit for the Company on the termination date. Each Class II Preferred share will be valued at the amount, if any, of the difference between the Net Assets per unit of the Company and $20 (the original issue price of the Class I Preferred shares) subject to a maximum value of $15 per share. As such, if the net asset value per unit remains below $20 per unit on termination date, this would mean that each Class II Preferred share would receive no payment. Capital shares will receive no payment unless the unit value was in excess of $35 per unit at termination date. The net asset value per unit as at November 30, 2011 was $17.74. Any retractions received under the January 2012 monthly retraction privilege will be calculated in the same manner as the final termination amount for each class of share.

Class I Preferred shareholders have received total dividends of $14.90 per share since inception. The final quarterly dividend of $0.275 to Class I Preferred shareholders will be made on January 31, 2012. Class II Preferred shareholders have received total dividends of $10.54 per share since inception. Any quarterly Class II Preferred share dividends suspended since July 2008 cannot be declared or made payable if the net asset value is below $20 per unit due to the priority ranking of the Class I Preferred shares. Capital shares have received total dividends of $7.25 per share since inception. Overall, a total of $32.69 per unit in distributions was made since inception.

The Manager will begin liquidating the portfolio during the latter half of January 2012 in preparation for the final redemption. A final net asset value will be calculated as at January 31, 2012 and will be used to determine the final redemption prices.

Payment of the redemption prices as applicable are expected to be made no later than February 16, 2012 and will be paid to the beneficial holders of such shares through payment to the CDS participant through which such shares are held.

The Company anticipates that trading in all three classes of shares on the Toronto Stock Exchange will be halted at the opening of trading on February 1, 2012 and that such shares would then be de-listed from the Exchange effective the close of trading on that date. Once all necessary tax clearance certificates are obtained and other corporate formalities observed, it is expected that the Company will then be dissolved.

So in a nutshell, YLD.PR.A gets the first $20, YLD.PR.B gets the next $15 and YLD gets the balance. Trouble is the NAV is currently only 17.74.

YLD.PR.A and YLD.PR.B have both been tracked by HIMIPref™, but have been relegated to the Scraps index on credit concerns. Tracking of YLD.PR.B will cease immediately, but tracking of YLD.PR.A is expected to continue until redemption. YLD.PR.A and YLD.PR.B were last discussed on PrefBlog in connection with the 09H1 Financial Statements.

If we look at the January 2011 Annual Report, we can get a good feel for how this happened:

This entry was posted on Tuesday, December 6th, 2011 at 4:13 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.