FTU.PR.A Downgraded to Pfd-3 by DBRS


has today downgraded the Preferred Shares issued by US Financial 15 Split Corp. (the Company) to Pfd-3 from Pfd-2 with a Stable trend. The rating had been placed Under Review with Developing Implications on March 19, 2008.

There is a NAV test that prevents the Manager from paying out Class A Shares distributions if the NAV of the Portfolio is less than $15 per share.

The initial split share structure provided downside protection of 58% to the Preferred Shareholders (after expenses). Although the credit quality of the Portfolio 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 $24.14 per share to $14.19 (as of April 15, 2008), a decline of about 41%. As a result, the current downside protection available to the Preferred Shareholders is approximately 30%.

The redemption date for both classes of shares issued is December 1, 2012.

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.

The question of how to analyze FTU.PR.A has been discussed on PrefBlog, further to my comment in January that a downgrade looked likely. The issue is tracked by HIMIPref™ and comprises part of the SplitShare Index.

5 Responses to “FTU.PR.A Downgraded to Pfd-3 by DBRS”

  1. […] coverage of 1.4+:1 as of April 14, according to the company. Recenty downgraded to Pfd-3 by DBRS and will be removed from the index at the April month-end rebalancing. Now with a pre-tax bid-YTW […]

  2. […] coverage of just under 1.6:1 as of April 30, according to the company. Downgraded to Pfd-3 by DBRS and removed from the HIMIPref™ indices. Now with a pre-tax bid-YTW of 7.49% based on […]

  3. […] I suspect that FTU.PR.A (US Financial 15 Split) is ripe for another downgrade … it was downgraded to Pfd-3 when asset coverage was 1.4+:1 … asset coverage is just under 1.1:1 as of June […]

  4. […] this asset coverage of slightly under 1.2:1 isn’t going to reverse the recent downgrade to Pfd-3. But just for fun, suppose we don’t need no stinking credit ratings. The prefs, FTU.PR.A, […]

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