DBRS has:
today confirmed the Preferred Shares issued by R Split III Corp. (the Company) at Pfd-2 (low) with a Stable trend. The rating had been placed Under Review with Developing Implications on March 19, 2008.
In April 2007, the Company raised gross proceeds of $140 million by issuing 2.273 million Preferred Shares at $29.22 each and 4.546 million Capital Shares at $16.19 each. The net proceeds from the offering were invested in a portfolio of common shares (the RBC Shares) of Royal Bank of Canada (RBC). The initial split share structure provided downside protection of 50% to the Preferred Shares (net of issuance costs).
The holders of the Preferred Shares receive fixed cumulative quarterly distributions equal to 4.5% per annum. The current yield on the RBC Shares provides dividend coverage of approximately 1.4 times. Excess dividends net of all expenses of the Company are paid as dividends on the Capital Shares.
The current downside protection available to the Preferred Shareholders is approximately 40% (as of May 8, 2008). The confirmation of the Preferred Shares is based on the current level of asset coverage available to cover the Preferred Shares principal, as well as the strong credit quality of RBC (rated AA by DBRS).
The redemption date for both classes of shares issued is May 31, 2012.
This follows announcement of the mass review of financial-based splits. RBS.PR.A is only the second issue to emerge unscathed; there have been seven downgrades with five issues still in review.
Downside protection of 40% equates to asset coverage of just under 1.7:1. As of May 8, Scotia Managed Companies reports asset coverage of … just under 1.7:1.
RBS.PR.A is not tracked by HIMIPref™.
[…] Split III Corp, which recently had its rating confirmed at Pfd-2(low) by DBRS, has announced: that it has called 2,032 Preferred Shares for cash redemption on May 30, 2008 (in […]