Following the shareholder approval of the term extension, DBRS:
has today placed the rating of the Preferred Shares issued by Financial 15 Split Corp. (the Company) Under Review with Developing Implications.
An initial rating of Pfd-2 was assigned to the Preferred Shares in November 2003. The Preferred Shares had a scheduled final maturity date of December 1, 2008. On June 3, 2008, Quadravest Capital Management (the Manager) announced a proposal would be made to the Company’s shareholders to extend the mandatory termination date for the Company from December 1, 2008 to December 1, 2015.
On July 23, the Manager announced that the resolution to extend the final maturity was approved by the required percentage of Preferred Shareholders and Class A Shareholders. As a result of such developments, DBRS has placed the rating of the Preferred Shares Under Review with Developing Implications.
FTN.PR.A had an asset coverage of just under 1.7:1 as of July 15, according to the company, with the note:
As at the close on July 17, 2008, there have been material upward movements in the net asset values ranging from 10% to 25%.
Shall we guess? Based on the downgrade of WFS.PR.A and the downgrade of FFN.PR.A, I’d call it 50-50 between a rating of Pfd-2(low) and Pfd-3(high) once the review has been completed.
We shall see. But my personal opinion is that Pfd-3 (high) is unthinkable for FTN.PR.A, unless the 15 financial stocks that are art of Financial 15 Split plunge even deeper than they did in June and July while DBRS is performing its review. After the close today, my calculations lead to an asset coverage of 1.9:1 (1.98:1 to be more precise… but I always prefer to round it down to the lower decimal, just to play it safe, so let’s keep it at 1.9:1).
So my own guess would be 50-50 between a confirmation of the current Pfd-2 rating and a downgrade to Pfd-2 (low).
Well, I certainly hope you’re right, although I think an unchanged rating is a bit of a stretch. I’d hate to lose this issue from the index, with its newly extended term and large float.
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