PrefBlog

Faircourt Asset Management has announced:

the completion of the merger of Faircourt Income & Growth Split Trust (“FIG”) into Faircourt Split Trust, as the continuing fund (“FCS”), effective September 30, 2010 (the “Merger”). The Merger was approved by unitholders and preferred securityholders of each of FIG and FCS at special meetings of the preferred securityholders and unitholders held on September 13, 2010, September 20, 2010 and September 27, 2010. FCS will continue trading on the Toronto Stock Exchange (“TSX”) under the symbols “FCS.UN” for the units and “FCS.PR.B” for the new preferred securities.
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In addition, in connection with the Merger, the preferred securities of FIG were exchanged on a one-for-one basis for 6.25% preferred securities of FCS. Again, as preferred securities are recorded on a book-based system, no action is required by holders of the preferred securities to be recognized as a preferred securityholder of FCS.

By effecting the Merger on a taxable basis for both the unitholders and the holders of preferred securities rather than on a tax-deferred rollover basis, the Merger will also enable FCS to preserve its realized capital losses from the current taxation year and loss carry forwards from prior taxation years and to avoid realizing its unrealized losses.

DBRS has announced that it:

has today assigned a rating of Pfd-3 (low) to the 6.25% Preferred Securities issued by Faircourt Split Trust (FCS). DBRS has also discontinued the Pfd-3 rating of FCS’s 5.75% Preferred Securities and the Pfd-4 (high) rating of the Preferred Securities issued by Faircourt Income & Growth Split Trust (FIG).

Faircourt Asset Management Inc. (Faircourt) was the manager of both FIG and FCS. The ratings of FIG and FCS were placed Under Review with Developing Implications on August 19, 2010, after Faircourt announced that shareholder meetings would be held for both funds to vote on a proposal to merge FIG into FCS (the Continuing Trust). In meetings held from September 13 to 27, 2010 (adjournments were caused by a lack of quorum), the preferred securityholders and unitholders of FIG and FCS approved the merger.
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The FIG preferred securityholders approved an extraordinary resolution authorizing the exchange of their existing securities for the new series of 6.25% Preferred Securities issued by FCS.
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Holders of the 6.25% Preferred Securities have benefited from an effective upgrade in credit quality, resulting mainly from an increase in downside protection following the merger into the Continuing Trust.
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The Pfd-3 (low) rating of the 6.25% Preferred Securities is primarily based on the downside protection available (32% as of October 5, 2010) and the diversification of the Continuing Trust’s investment portfolio. The main constraints to the rating are the following:

(1) The downside protection provided to holders of the 6.25% Preferred Securities is dependent on the value of the securities in the investment portfolio.

(2) Volatility of price and changes in the dividend policies of the underlying issuers may result in significant reductions in dividend coverage or downside protection from time to time.

(3) Reliance on the manager to generate a high yield on the investment portfolio to meet distributions and other trust expenses without having to liquidate portfolio securities.

The 6.25% Preferred Securities are scheduled to mature on December 31, 2014.

FIG.PR.A was last mentioned on PrefBlog when the merger and exchange was approved. FCS.PR.B is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.

This entry was posted on Thursday, October 7th, 2010 at 9:55 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.