FFN.PR.A Downgraded to Pfd-2(low) by DBRS


has today downgraded the Preferred Shares issued by Financial 15 Split Corp. II (the Company) to Pfd-2 (low) from Pfd-2 with a Stable trend. The rating had been placed Under Review with Developing Implications on March 19, 2008.

There is a NAV test that prevents the Manager from paying out Class A Shares distributions if the NAV of the Portfolio is less than $15 per share.

The initial split share structure provided downside protection of 58% to the Preferred Shareholders (after expenses). Although the credit quality of the Portfolio is strong, the NAV of the Portfolio has experienced downward pressure due to its concentration in the financial services industry. In the last year, the NAV has dropped from $26.35 per share to $19.27 (as of April 15, 2008), a decline of about 27%. As a result, the current downside protection available to the Preferred Shareholders is approximately 48%.

Downside protection of 48% equates to asset coverage of about 1.9:1.

This is part of DBRS’ mass review of financial splits which, I believe, marks an end (or at least an increased strictness) to what I perceive as their grandfathering of older, looser standards for split shares, discussed last fall.

FFN.PR.A holders approved a term extension about a year ago (and the capital unitholders, I’ll bet, wish they hadn’t!). The issue is tracked by HIMIPref™ and comprises part of the SplitShare Index.

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