PrefBlog

US Financial 15 Split Corp. has announced:

a Class A share consolidation for all Class A shareholders of record on June 25, 2012 (the “Consolidation”) that will decrease the number of Class A shares held by each Class A shareholder. The purpose of the share Consolidation is to maintain an equal number of Class A shares and Preferred shares outstanding. The intrinsic value of each investor’s holdings in Class A shares will remain the same after the Consolidation.

As a result of the successful vote to reorganize the Preferred shares of the Company at the recent Special Meeting of Shareholders held on April 16, 2012, both Class A shareholders and Preferred shareholders were given a special retraction right. This special retraction right allowed both classes of shareholders to tender one or both classes of shares. In aggregate, there were more Preferred shares tendered for retraction than Class A shares. Since the Company is required to maintain an equal number of shares outstanding for each class as per the prospectus, the Company must decrease the Class A shares to match the number of Preferred shares.

Immediately after payments for the May and June monthly retraction and the special retraction right on June 19, 2012, there will be 2,207,399 Preferred shares and 3,080,059 Class A shares outstanding. In order to restore an equal amount of shares outstanding for each class, Class A shareholders of record as at June 25, 2012 will receive approximately 0.71667425851 Class A shares for each Class A share outstanding. The decrease in shares (Consolidation) is a non taxable event.

The impact of the Class A share Consolidation will be reflected in the next reported net asset value per unit as at the June 22, 2012 Consolidation date. Net assets of the Company after the retraction payments will be approximately $9.2 million.

It looks like not a single one of the Capital Units was retracted, which makes sense because retractors will be paid nothing and can have had no reasonable expectation of being paid anything. But, if there were any who did retract, the company was successful in recirculating their shares.

As the June 15 NAVPU (net of accrued but unpaid preferred share dividends) was only 4.42, credit quality cannot be said to have improved as a result of the consolidation.

The reorganization has been discussed previously on PrefBlog. FTU.PR.A used to be tracked by HIMIPref™, but no more, since the preferred share dividends will now be calculated as a percentage of NAV, rather than as a percentage of par.

This entry was posted on Tuesday, June 19th, 2012 at 7:10 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.