LCS.PR.A Upgraded to Pfd-3(low) by DBRS

DBRS has announced that it has:

upgraded the rating of the Preferred Shares issued by Brompton Lifeco Split Corp. (the Company) to Pfd-3 (low) from Pfd-4 (high).

Based on the dividend yields of the underlying companies in the Portfolio and after management fees and other expenses have been paid, the dividend coverage ratio stands at 0.6x.

The main form of credit enhancement available to the Preferred Shares is a buffer of downside protection. Downside protection corresponds to the percentage decline in market value of the Portfolio that must be experienced before the Preferred Shares would be in a loss position. Since the last review, the amount of downside protection available to the Preferred Shares has increased to 39.8% posting a 5.4% gain as of October 12, 2017. The growth in downside protection was a combination of a price appreciation and a dividend payout increase of the underlying shares of the Portfolio as well as additional income generated from option writing.

Brompton Group was quick to highlight the upgrade:

As a result of improving portfolio performance, DBRS Limited (“DBRS”) issued a press release on Thursday, October 19, 2017 announcing that the preferred share rating for Brompton Lifeco Split Corp. has been upgraded from Pfd-4(high) to Pfd-3(low). For a full copy of the DBRS press release please visit their website at

This is quite the turnaround from the dark days of 2012 when the issue was downgraded to Pfd-5(high) and a notch better than its December 2013 upgrade to Pfd-4(high).

The Whole Unit NAVPU as of 2017-10-12 was 16.71. Income coverage in 2016 was, by my calculation, 65%. The total assets of the fund, including Capital Units, were $86-million as of 2017-9-30.

LCS.PR.A is tracked by HIMIPref™ but relegated to the Scraps index on both credit concerns and volume concerns.

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