SBC To Split Capital Units, Issue Preferreds

Brompton Group has announced:

Brompton Split Banc Corp. (the “Company”) is pleased to announce its intention to effect a stock split of its Class A shares (the “Share Split”) as well as a concurrent private placement of preferred shares (the “Private Placement”) due to the Company’s strong performance. The Company expects that the Share Split should result in an overall increase in the dollar amount of distributions to be paid to holders of Class A shares by approximately 25% because the Company will maintain its policy to pay monthly dividends on the Class A shares of $0.10 per share. The Company intends to announce the final number of Class A shares and Preferred shares expected to be outstanding following the Share Split and Private Placement by way of press release on or about December 1, 2021.

It is the Company’s intention that Class A shareholders of record on or about Tuesday, December 14, 2021 will receive additional Class A shares pursuant to the Share Split. The number of preferred shares offered in the Private Placement will be an amount such that following the Share Split there will be an equal number of Class A and preferred shares outstanding. The Company expects that the Share Split and the Private Placement will result in an approximately 25% increase in the number of outstanding Class A shares and preferred shares. The Share Split and the Private Placement are subject to regulatory approval as well as the approval of the Toronto Stock Exchange (the “TSX”).

Following the Share Split, Class A shareholders will continue to receive the currently targeted monthly distribution of $0.10 per Class A share, although Class A shares per investor should reflect a balance which is 25% higher than prior to the Share Split. As such, existing Class A shareholders are expected to be provided with an effective increase in monthly cash distributions equal to approximately 25%. The Company provides a distribution reinvestment plan, on a commission-free basis, for Class A shareholders that wish to reinvest distributions and realize the benefits of compound growth.

Following the completion of the Share Split and the Private Placement, the preferred shares are expected to have downside protection from a decline in the value of the Company’s portfolio of approximately 56%.(1)

Over the last 10 years, the Class A shares have delivered a 17.8% per annum total return based on NAV, outperforming the S&P/TSX Capped Financials Index by 5.1% per annum and the S&P/TSX Composite Index by 9.0% per annum.(2)

Since inception, Class A shareholders have received cash distributions of $18.75 per Class A share.

The preferred shares have delivered a 4.9% per annum total return over the last 10 years based on NAV, outperforming the S&P/TSX Preferred Share Index by 1.5% per annum with lower volatility.(2)

The Company invests, on an approximately equal weighted basis, in a portfolio (the “Portfolio”) consisting of common shares of the six largest Canadian banks (currently, Royal Bank of Canada, The Bank of Nova Scotia, National Bank of Canada, The Toronto-Dominion Bank, Canadian Imperial Bank of Commerce and Bank of Montreal). In addition, the Company may hold up to 10% of the total assets of the Portfolio in investments in global financial companies for the purposes of enhanced diversification and return potential.

3 Responses to “SBC To Split Capital Units, Issue Preferreds”

  1. mbarbon says:

    Totally don’t understand the process here…

    Preferred shareholders given less security (since each preferred had the security of an extra capital share valued at around $16.10, and now its $13 ) with no compensation.
    These split off shares will also retain 10c distribution, so even more money being taken out to the possible detriment of preferred share holder security.

    And Capital shareholders get more money out of it, but chances are its just ROC.. so nothing really… Plus that just puts Class A shareholders closer to $5 where no distributions are paid out.

    I think its a ploy to get the fund bigger and thus earn more fees….

  2. CanSiamCyp says:

    James:

    Please be advised – another Rate Reset is biting the dust on 31 Dec.:

    ECN Capital announced redemption of Cumulative 5-Year
    Minimum Rate Reset Preferred Shares, Series A (ECN.PR.A)
    on Dec 31. Please see attached press release.

    Cheers!

  3. jiHymas says:

    And Capital shareholders get more money out of it, but chances are its just ROC.. so nothing really… Plus that just puts Class A shareholders closer to $5 where no distributions are paid out.

    To be fair, Capital Unitholders are getting increased leverage, which is one of the things they want.

    I think its a ploy to get the fund bigger and thus earn more fees….

    I’m sure that consideration played a role in the decision!

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