PIC.PR.A Downgraded to Pfd-3(high) by DBRS


has today downgraded the Preferred Shares issued by Mulvihill Premium Canadian Bank (the Company) to Pfd-3 (high) from Pfd-2 with a Stable trend. The rating had been placed Under Review with Developing Implications on March 19, 2008.

Holders of the Preferred Shares receive fixed cumulative quarterly dividends yielding 5.75% per annum on the par value. The Company aims to provide holders of the Class A Shares with quarterly distributions of $0.20 per share, as well as the opportunity to receive special distributions based on performance of the Company. These distributions have the potential to grind down the net asset value (NAV) of the Portfolio over time.

Although the credit quality of the Banks is strong, the NAV of the Portfolio has experienced downward pressure due to its concentration in the financial industry. In the last year, the NAV has dropped from $27.41 per share to $21.47, and the current downside protection available to the Preferred Shareholders is approximately 30%.

The redemption date for both classes of shares issued is November 1, 2010.

Downside protection of 30% equates to asset coverage of about 1.4:1.

This is part of DBRS’ mass review of financial splits which, I believe, marks an end (or at least an increased strictness) to what I perceive as their grandfathering of older, looser standards for split shares, discussed last fall.

PIC.PR.A was added to the S&P/TSX Preferred Share Index in July, 2007 and removed in December. The issue is tracked by HIMIPref™ and comprises part of the SplitShare Index.

2 Responses to “PIC.PR.A Downgraded to Pfd-3(high) by DBRS”

  1. […] coverage of just under 1.5:1 as of April 24 according to the company. Recently downgraded to Pfd-3(high) by DBRS, will be removed from the SplitShare index at the April rebalancing. Now with a pre-tax bid-YTW of […]

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