PrefBlog

DBRS has announced (on 2017-11-27) that it:

confirmed the Issuer Rating of Bombardier Inc. (Bombardier or the Company) at B and has changed the trend to Stable from Negative. This action reflects some evidence of stabilization in the Company’s financial profile, albeit at a very weak level; the expectation that further modest improvement should be achievable over the next 12 months; material progress achieved after two years of the Company’s margin-improving five-year transformation initiative, especially in the rail division; greater visibility regarding the viability of the C Series program as a result of the partnership announced with Airbus SE; and liquidity that remains sufficient for near-term requirements. Bombardier’s rating continues to be supported by its 70% stake in Bombardier Transportation (BT), a global leader in rail manufacturing and solutions; the significant capital and technological barriers to entry into its various business lines; and the Company’s broad portfolio of business aircraft offerings, to be complemented by the ultra-long-distance Global 7000, which is currently undergoing flight testing and may enter into service in H2 2018. Significant execution risks associated with new aircraft development, volatile end markets and modest margins are structural challenges.
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DBRS anticipates that the Company’s business risk profile is likely to remain largely unchanged over the next 12 months, although further improvements from the transformation program should be supportive. The financial risk profile should achieve modest improvement, although DBRS views the Company’s target of achieving a free cash flow break-even position in 2018 as aggressive. Key metrics are projected to improve to within at least the B rating category in F2018.

Overall, DBRS views Bombardier’s strategic actions, such as the Airbus partnership, operating performance within the context of the transformation plan and important milestones achieved such as the successful flight testing hours of the Global 7000 as illustrative of a more stable footing. Liquidity remains adequate for near-term requirements and there are no significant long-term debt maturities until 2020. (DBRS expects the new issuance of 7.50% Senior Notes due in 2024 that is currently underway, and the associated tender offer for the 4.75% Senior Notes due 2019, to be successful.) Bombardier would need to demonstrate material improvement in key financial metrics and prove that free cash flow surpluses have been achieved or are imminent before DBRS would consider an upgrade. Significant cost overruns or Entry-Into-Service (EIS) delays of the Global 7000, evidence that the margin gains under the transformation plan are not sustainable, concerns regarding liquidity, or substantial downturns in key destination markets may lead to DBRS considering a downgrade.
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This is an unsolicited credit rating.

This rating is no longer endorsed by DBRS Ratings Limited for use in the European Union.

BBD was downgraded to Pfd-4(low) by DBRS in November 2013, and the preferred share coverage was immediately discontinued. Affected issues (since the issuer rating will affect everything) are BBD.PR.B, BBD.PR.C and BBD.PR.D.

S&P downgraded the issues to P-5(low) in September 2016, where they remain.

Harvest Portfolios Group Inc. has announced:

that Big Pharma Split Corp. (the “Company”) has completed its initial public offering (the “Offering”) of 1,360,000 Preferred Shares and 1,360,000 Class A Shares for aggregate gross proceeds of $34 million. The Company has granted the Agents (as defined below) an over-allotment option, exercisable for a period of 30 days from today’s date, to purchase up to an additional 204,000 Preferred Shares and up to an additional 204,000 Class A Shares. The Class A Shares and the Preferred Shares will commence trading today on the Toronto Stock Exchange under the symbols “PRM” and “PRM.PR.A”, respectively.

The Company will invest in an initially equally-weighted portfolio (the “Portfolio”) of ten issuers comprised of equity securities selected by Harvest from a universe of pharmaceutical issuers that at the time of investment and immediately following each semi-annual reconstitution and rebalancing: (i) are listed on a North American exchange; (ii) pay a dividend; and (iii) have options in respect of its equity securities that, in the opinion of Harvest, are sufficiently liquid to permit Harvest to write options in respect of such securities (the “Investable Universe”). The Portfolio will be comprised primarily of the largest (as determined by market capitalization calculated in US$) pharmaceutical issuers in the Investable Universe. In order to seek to generate additional returns, Harvest may write call options each month in respect to some or all of the equity securities in the Portfolio.

The investment objectives for the Preferred Shares are to provide their holders with fixed cumulative preferential quarterly cash distributions in the amount of $0.125 per Preferred Share ($0.50 per annum or 5.0% per annum on the $10.00 issue price) until December 31, 2022 (the “Maturity Date”) and to return of the original issue price to holders on the Maturity Date.

The investment objectives for the Class A Shares are to provide their holders with regular monthly cash distributions targeted to be $0.1031 per Class A Share ($1.2372 per annum or 8.25% per annum on the $15.00 issue price) and with the opportunity for growth in net asset value per Class A Share.

Harvest is the manager, portfolio manager and promoter of the Company.

The syndicate of agents for the Offering is being co-led by BMO Capital Markets, CIBC Capital Markets and Scotiabank and also includes National Bank Financial Inc., Canaccord Genuity Corp., GMP Securities L.P., Raymond James Ltd., Desjardins Securities Inc., Echelon Wealth Partners Inc., Industrial Alliance Securities Inc., Mackie Research Capital Corporation and PI Financial Corp. (collectively, the “Agents”).

For additional information: Please visit www.harvestportfolios.com, e-mail info@harvestportfolios.com or call toll free 1-866-998-8298.

The SplitShare Corporation has its own web-page.

The preferred shares have been rated Pfd-3(high) by DBRS:

The Class A Share distributions are subject to the asset coverage test, which does not permit any distributions to holders of the Class A Shares if the net asset value (NAV) of the Company falls below $15.00 or if the dividends of the Preferred Shares are in arrears.
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Based on current asset coverage of 2.4 times (x), the net asset value of the Company would have to fall by approximately 57.5% for the holders of the Preferred Shares to be in a loss position. The initial dividend coverage ratio is 0.4x. To supplement Portfolio income, the manager will engage in call option writing.

On maturity, the holders of the Preferred Shares will be entitled to the value of the Portfolio up to the face value of the Preferred Shares and any accrued but unpaid dividends in priority to the holders of the Class A Shares.
The credit quality of the Portfolio is strong, though it is concentrated in the health-care sector. Nevertheless, the underlying companies from the indicative Portfolio have a consistent dividend paying history. The Company’s NAV may be sensitive to volatility of prices of the Portfolio securities as well as changes in the dividend policies of the underlying companies and the health-care industry-specific risks. In assigning the Pfd-3 (high) rating, DBRS has taken into account (1) the level of downside protection available to holders of the Preferred Shares, (2) the Portfolio quality, (3) potential foreign-exchange risk because the income received on the Portfolio will not be hedged and (4) stated distributions to the Class A Shares.

This issue will not be tracked by HIMIPref™ as it is too small to allow for reasonable expectations of efficient tradability. But here’s hoping they build it up!