High Income Preferred Shares Corporation has announced:
that given the erosion in the value of the Managed Portfolio since inception, two recent ratings downgrades by DBRS and based on advice received from the Manager, it believes it would be prudent to revise the distribution policy. Consequently, distributions to Series 1 (TSX:HPF.pr.a) and Series 2 (TSX:HPF.pr.b) Shareholders will be suspended following the previously announced distribution that is payable on March 31st, 2008.
Maintenance of the current distribution policy without causing further erosion to the Managed Portfolio requires HI PREFS to generate an annual return in excess of 20%. As such, based on the advice of the Manager, the Board believes the decision to suspend further distributions is in the best interests of shareholders in the current market environment.
The Board will continue to review the distribution policy on a regular basis. Unpaid distributions to Series 1 and Series 2 Shareholders are cumulative and will be paid on the scheduled termination of HI PREFS on June 29, 2012. On termination, unpaid distributions to Series 1 and Series 2 Shareholders will be paid out of available net assets after the principal repayment to Series 1 Shareholders, but in priority to the principal repayment to Series 2 Shareholders.
Since inception, Series 1 Shareholders have received $8.33 per Series 1 Share in distributions and Series 2 Shareholders have received $6.07 per Series 2 Share in distributions in accordance with their terms.
HI PREFS Preferred Repayment Forward Agreement remains in place with Canadian Imperial Bank of Commerce. This will provide Series 1 Shareholders with a payment of $25.00 per share on June 29, 2012. HI PREFS Series 2 Shareholders will be entitled to the proceeds of the Managed Portfolio up to $14.70, after making provisions for the Company’s liabilities, if any, and after payment of any cumulative unpaid distributions to both Series 1 and Series 2 Shareholders on a pro rata basis. As of Friday, March 14, 2008, the Managed Portfolio had a Net Asset Value of $17.30 per Unit and the Series 2 Shares had a Net Asset Value of $13.14 per share. The Equity Shares, which are entirely held by the Manager and rank below the Series 2 Shares in priority for capital repayment, will receive no proceeds of the Managed Portfolio on termination unless Series 1 Shares are repaid their original investment amount of $25.00 per Series 1 Share, Series 1 and Series 2 Shareholders receive all cumulative unpaid distributions and the Series 2 Shareholders have been repaid their original investment amount of $14.70 per Series 2 Share.
The DBRS January 16 downgrade of these issues was reported by PrefBlog at the time.