Reset? Well, I couldn’t think of another word to use!
Brompton Funds announced in April that the term would be extended and the dividend changed on November 29; they announced the new rate on August 14:
At a special meeting held on April 11, 2013, shareholders of Life & Banc Split Corp. (“LBS” or the “Fund”) approved a special resolution to allow the Board of Directors to extend the term of the Class A Shares and the Preferred Shares for up to 5 years and to determine the distribution ratesfor the extended term. The Board of Directors is pleased to announce that it has approved a 5 year extension to the term of the Class A Shares and Preferred Shares to November 29, 2018. The Fund was originally scheduledto terminate on November 29, 2013. The distribution rate for the Fund’s Preferred Shares for this new 5 year term which commences on November 30, 2013 will be $0.475 per annum paid in equal quarterly amounts. The new Preferred Share distribution rate is based on current market rates for preferred shares with similar terms. The Preferred Share distribution for the quarter ended December 31, 2013 is expected to be $0.12690 per Preferred Share which takes into account the new distribution rate for December and the previous distribution rate for October and November. In addition, the Fund intends to maintain the targeted monthly Class A Share distribution at $0.10 per Class A Share.
LBS invests in a portfolio, on an approximately equal weight basis, of common shares of 6 Canadian Banks: Bank of Montreal, Canadian Imperial Bank of Commerce, National Bank of Canada, Royal Bank of Canada, The Bank of Nova Scotia and The Toronto-Dominion Bank and 4 Canadian life insurance companies: Great-West Lifeco Inc., Industrial Alliance Insurance and Financial Services Inc., Manulife Financial Corporation and Sun Life Financial Inc. The extension of the term of the Fund is not a taxable event and enables shareholders to defer potential capital gains tax liability that would have otherwise been realized on the redemption of the Class A Shares or Preferred Shares until such time as such shares are disposed of by shareholders.
In connection with the extension, those shareholders who do not wish to continue their investment in the Fund and do not wish to sell their shares through the TSX, may retract their Preferred Shares or Class A Shares on November 29, 2013 pursuant to a special retraction right and receive a retraction price that is calculated in the same way that such price would be calculated if the Fund were to terminate on November 29, 2013. Such retraction price will be approximately equal to the net asset value per share less certain costs including trading commissions. The notice expiry for the special retraction is October 31, 2013 at 5:00 p.m. (Toronto time). Shareholders are reminded that Class A Shares and Preferred Shares have traded at an average premium to net asset value of 8.7% and 1.2%,respectively, over the past 12 months to July 31.
The new rate of 4.75% represents a modest decline from the previous rate of 5.25%.
LBS.PR.A currently has asset coverage of 1.8-:1 and income coverage of 100%. The reduced dividend on the preferreds will move income coverage over the 100% mark.
I recommend that holders retain their shares.
[…] was last mentioned on PrefBlog when the new dividend rate on the preferreds, 4.75%, was announced. LBS.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index […]