DBRS has announced that it:
has today taken a range of rating actions on 54 structured preferred shares issued by 49 split share companies and trusts (the Issuers). All the trends are now Stable.
Each of the Issuers has invested in a portfolio of securities (the Portfolio) funded by issuing two classes of shares – dividend-yielding preferred shares or securities (the Preferred Shares) and capital shares or units (the Capital Shares). The main form of credit enhancement available to these 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. The amount of downside protection available to Preferred Shares will fluctuate over time based on changes in the market value of the Portfolio.
Of the 54 structured Preferred Share ratings updated today by DBRS, 32 have been upgraded, 18 have been confirmed and four have been downgraded. The majority of the ratings have been upgraded as a result of the strong gains in global equity markets over the past five months. In the first quarter of 2009, DBRS downgraded many of its Preferred Share ratings because of rapid and substantial declines in company net asset values (NAVs). From August 31, 2008, to March 9, 2009, the S&P/TSX Composite Index lost 45% of its value. Since March 9, the index has gained back more than half of those losses. As a result, many of the Preferred Shares that were downgraded in February or March have seen significant increases in NAV and are now being upgraded.
In addition to the recent rebound in equity markets, another factor in today’s rating changes is the release of an updated DBRS split share methodology, “Rating Canadian Split Share Companies and Trusts,” which details DBRS’s approach to rating Preferred Shares issued by split share companies and trusts. DRBS has applied a number of changes to strengthen its split share rating process,
| DBRS Review Announced 2009-8-27 | |||||
| Ticker | Old Rating |
Asset Coverage |
Last PrefBlog Post |
HIMIPref™ Index |
New Rating |
| CGI.PR.B | Pfd-1 | 3.4-:1 8/27 |
Capital Unit Dividend In Doubt | SplitShare | Pfd-1(low) |
| CGI.PR.C | Pfd-1 | 3.4-:1 8/27 |
Capital Unit Dividend In Doubt | Scraps | Pfd-1(low) |
| BIG.PR.B | Pfd-2 | 3.4-:1 8/20 |
Offering Closes | None | Pfd-2(high) |
| CBU.PR.A | Pfd-2(low) | 3.4+:1 8/26 |
Completes investment of issue proceeds | None | Pfd-2 |
| DFN.PR.A | Pfd-3 | 2.0-:1 8/14 |
Semi-Annual Financials | Scraps | Pfd-3(high) |
| UST.PR.A | Pfd-2(low) | 1.8+:1 8/26 |
Renews Issuer Bid | None | Pfd-3(high) |
| LFE.PR.A | Pfd-4 | 1.6+:1 8/14 |
Semi-annual Financials | Scraps | Pfd-3(low) |
| FBS.PR.B | Pfd-4 | 1.6-:1 8/20 |
Capital Unit Dividend Reinstated | Scraps | Pfd-3 |
| ASC.PR.A | Pfd-5(low) | 1.1-:1 8/21 |
Downgraded | Scraps | Pfd-5 |
| ALB.PR.A | Pfd-4 | N/A | Downgraded | Scraps | Pfd-3 |
| BSD.PR.A | Pfd-5 | 1.0+:1 8/21 |
Downgraded | Scraps | Pfd-5 Trend Stable |
| DF.PR.A | Pfd-3(low) | 1.7-:1 8/14 |
Semi-Annual Financials | Scraps | Pfd-3 |
| DGS.PR.A | Pfd-3(low) | 1.7+:1 8/20 |
Downgraded | None | Pfd-3 |
| ES.PR.B | Pfd-5 | N/A | Downgraded | None | Pfd-4(low) |
| FCS.PR.A | Pfd-4 | 1.4+:1 8/26 |
Downgraded | None | Pfd-3(low) |
| GFV.PR.A | Pfd-3 | 1.6+:1 8/20 |
Downgraded | None | Pfd-3(high) |
| HPF.PR.A | Pfd-2(low) | Their Numbers Note Calculation Dispute | Downgraded | Scraps | Pfd-2(low) Stable |
| HPF.PR.B | Pfd-5(low) | Their Numbers Note Calculation Dispute | Downgraded | Scraps | Pfd-5(low) Trend Stable |
| FIG.PR.A | Pfd-5 | In Transition |
Capital Units Rights Offering | Scraps | Pfd-4 |
| PIC.PR.A | Pfd-5 | 1.3-:1 8/20 |
Downgraded | Scraps | Pfd-4 |
| NBF.PR.A | Pfd-4(low) | 1.4+:1 8/26 |
Capital Unit Dividend Reinstated | None | Pfd-3 |
| SLS.PR.A | Pfd-5(low) | N/A | Downgraded | None | Pfd-4 |
| SNP.PR.V | Pfd-4(high) | N/A | Downgraded | None | Pfd-3(low) |
| YLD.PR.A | Pfd-5(low) | 0.5+:1 1/30 |
Downgraded | Scraps | Pfd-5 |
| TXT.PR.A | Pfd-4(low) | 1.3+:1 8/20 |
Downgraded | None | Pfd-4(high) |
| WFS.PR.A | Pfd-4(low) | 1.3+:1 8/20 |
Downgraded | Scraps | Pfd-4 |
| ABK.PR.B | Pfd-3 | N/A | Miniscule Call for Redemption | None | Pfd-3(high) |
| TDS.PR.B | Pfd-3 | 2.3-:1 8/20 |
Downgraded | Scraps | Pfd-3(high) |
| FTN.PR.A | Pfd-4 | 1.8+:1 8/14 |
Semi-Annual Financials | Scraps | Pfd-3(low) |
| FFN.PR.A | Pfd-5(high) | 1.6-:1 8/14 |
Semi-Annual Financials | Scraps | Pfd-4(high) |
| BXN.PR.B | Pfd-3(high) | N/A | Downgraded | None | Pfd-3 |
| BK.PR.A | Pfd-3 | 2.0+:1 8/14 |
Semi-Annual Financials | Scraps | Pfd-3(high) |
| BSC.PR.A | Pfd-3 | N/A | Dividend Policy Revised | None | Pfd-3(high) |
| SBC.PR.A | Pfd-3 | 2.0+:1 8/20 |
Capital Unit Dividend Suspended | Scraps | Pfd-3(high) |
| PDV.PR.A | Pfd-3 | 1.8-:1 8/14 |
Downgraded | None | Pfd-3(high) |
| BBO.PR.A | Pfd-3(high) | 2.1+:1 8/20 |
Downgraded | None | Pfd-2(low) |
| LBS.PR.A | Pfd-3(low) | 1.8+:1 8/20 |
Downgraded | Scraps | Pfd-3 |
| RBS.PR.A | N/A | Dividend Policy Revised | None | Pfd-3 | |
| LCS.PR.A | Pfd-4 | 1.5-:1 8/20 |
Downgraded | None | Pfd-3(low) |
LCS.PR.A, with an asset coverage of 1.46:1 as of August 20, gets the same Pfd-3 (low) rating as FTN.PR.A, which had an asset coverage of 1.81:1 as of August 14. This is a significant difference in asset coverage. And on top of that, FTN.PR.A’s underlying portfolio is more diversified than LCS.PR.A’s.
I don’t get it.
LCS.PR.A had income coverage of 0.8+:1 in 2008 and has roughly 25% exposure to the recently cut MFC.
FTN.PR.A had income coverage of 1.2+:1 in 1H09 and less exposure to MFC.
So that’s not it.
FTN is scheduled to wind up 2015-12-1; LCS on 2014-4-30. Maybe it’s the time-dependence of the VaR!
Seems a little peculiar to me, too!
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