PrefBlog

On November 17, First Asset Management announced:

that at an adjourned special meeting of the holders of Capital Units of the Fund held today, Capital Unitholders approved (i) a five year extension of the Fund’s termination date from December 31, 2011 to December 31, 2016, and (ii) a special retraction right to enable Capital Unitholders who do not wish to extend their investment in the Fund to retract their Capital Units prior to December 31, 2011 on the same terms that would have applied had the Fund redeemed all of the Capital Units as originally contemplated on the scheduled termination date of December 31, 2011.
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Holders of the Fund’s Preferred Securities do not need to take any action. The Preferred Securities will be repaid on the same terms as originally contemplated by the trust indenture. In particular, each holder of a Preferred Security on December 31, 2011 will be paid an amount equal to the Repayment Price, being the original subscription price of $10 per Preferred Security together with any accrued and unpaid interest thereon. Payment is expected to be made on or about January 3, 2012. The Preferred Securities will be delisted from the TSX as at the close of business on Friday, December 30, 2011.

On December 19, they announced:

that it has completed its offering of Class B Preferred Securities. The Fund issued 1,203,576 Class B Preferred Securities for gross proceeds of approximately $12 million. The Class B Preferred Securities are listed on the Toronto Stock Exchange (“TSX”) under the symbol UST.PR.B. The Class B Preferred Securities have been rated Pfd-2 (low) by DBRS Limited.

DBRS has confirmed the Pfd-2(low) rating:

Dividends received on the Portfolio will be used by the Fund to make quarterly fixed cumulative distributions of $0.13125 per Class B Preferred Security to yield 5.25% annually. Based on the current dividend yields on the underlying portfolio entities, the initial dividend coverage ratio (net of expenses) is approximately 1.58 times. As a result, currently the Class B Preferred Security distributions (Interest Amount) are funded entirely from the dividends and distributions received on the securities in the Portfolio. Holders of the Capital Units are expected to receive all excess dividend income after the Class B Preferred Security distributions and other expenses of the Fund have been paid. The initial downside protection available to holders of the Class B Preferred Securities is approximately 56.4%.

The Pfd-2 (low) rating of the Class B Preferred Securities is based primarily on the downside protection and dividend coverage available, as well as on the measures in place to protect the distributions to and repayment of the Class B Preferred Securities (i.e., the Class B Preferred Securities Test, which does not permit any distributions to the Capital Unit holders if the NAV of the Portfolio is less than 1.5 times the outstanding principal amount for the Class B Preferred Securities).

The main constraints to the rating are the following:

(1) The downside protection available to holders of the Class B Preferred Securities is dependent on the value of the shares in the Fund, which are determined by supply and demand factors for utility issuers

(2) The concentration of the entire Portfolio in the utility and energy sector.

(3) The weighted-average yield from the underlying Portfolio holdings could change from time to time, which could result in reductions in interest coverage.

UST.PR.B will not be tracked by HIMIPref™ as it is too small.

This entry was posted on Tuesday, January 3rd, 2012 at 11:04 pm and is filed under Issue Comments, New Issues. 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.