DBRS has announced that it:
has today upgraded the rating of the Class B Preferred Securities issued by Utility Split Trust (the Fund) to Pfd-2 from Pfd-2 (low). Approximately 1.2 million Class B Preferred Securities were issued on December 19, 2011, following the redemption of the previously outstanding Preferred Securities in accordance with their original terms as part of a share capital reorganization. The final redemption date for the Class B Preferred Securities is December 31, 2016.
Based on the current dividend yields on the underlying portfolio entities, the dividend coverage ratio (net of expenses) is approximately 0.77 times. Shortfalls are expected to be funded through the sale of portfolio securities or drawing upon a loan facility. Holders of the Capital Units are currently receiving $0.05 per unit each month after the Class B Preferred Securities distributions and other expenses of the Fund have been paid.
Since the rating was confirmed in December 2013, Fund performance has been steadily improving. The net asset value (NAV) of the Fund has increased to $29.54 from $26.32,, with downside protection available to holders of the Class B Preferred Securities increasing to approximately 66.2%. From time to time the Portfolio has had a large cash and cash equivalents position that has decreased the income received by the Fund, resulting in a grind on the Portfolio. The Pfd-2 rating of the Class B Preferred Securities is based primarily on the downside protection available, as well as on the measures in place to protect the distributions to and repayment of the Class B Preferred Securities (i.e., the Class B Preferred Security Test, which does not permit any distributions to the Capital Unit holders if the NAV of the Portfolio is less than 1.5 times the outstanding principal amount for the Class B Preferred Securities).
UST.PR.B was last mentioned on PrefBlog when it was issued in a refunding transaction. The issue is not tracked by HIMIPref™ since, with a market capitalization of about $12.3-million, it is too small.