PrefBlog

Brompton Funds has announced:

that the Company’s treasury offering of class A and preferred shares has been priced at $7.00 per class A share and $10.00 per preferred share. The final class A share and preferred share offering prices were determined so as to be non-dilutive to the net asset value per unit of the Company on April 16, 2014, the most recently calculated net asset value, as adjusted for dividends and certain expenses accrued prior to or upon settlement of the offering.

Brompton Lifeco Split Corp. invests in a portfolio, on an approximately equal weight basis, of common shares of Canada’s four largest publicly-listed life insurance companies: Great-West Lifeco Inc., Industrial Alliance Insurance and Financial Services Inc., Manulife Financial Corporation and Sun Life Financial Inc.

The Company intends to file a final prospectus in each of the provinces and territories of Canada in connection with the offering. The offering is expected to close on or about May 1, 2014 and is subject to customary closing conditions including approvals of applicable securities regulatory authorities and the Toronto Stock Exchange.

The syndicate of agents for the offering is being led by RBC Capital Markets, CIBC, and Scotiabank, and includes BMO Capital Markets, National Bank Financial Inc., GMP Securities L.P., Raymond James Ltd., Desjardins Securities Inc., Dundee Securities Ltd., Mackie Research Capital Corporation, and Manulife Securities Incorporated.

On February 18, shareholders approved a term extension:

At a special meeting of preferred and class A shareholders (“Shareholders”) of Brompton Lifeco Split Corp. (“LCS”) held today, shareholders approved a special resolution to extend the term of LCS for approximately 5 years to April 29, 2019 and thereafter for successive terms of up to 5 years as determined by the LCS board of directors. Holders of Class A Shares voted approximately 99% in favour of the extension and holders of Preferred Shares voted approximately 97% in favour of the extension. The extension allows Shareholders to continue their investment in LCS’ portfolio of common shares of four Canadian life insurance companies (Great-West Lifeco Inc., Industrial Alliance Insurance and Financial Services Inc., Manulife Financial Corporation and Sun Life Financial Inc.). Shareholders will continue to have monthly and annual retraction rights.

In addition to the daily liquidity provided by the TSX listings, shareholders who do not wish to continue their investment may redeem either their preferred shares or class A shares on April 30, 2014 and each extension of the term thereafter on the same terms that currently exist. Further details are available in the management information circular dated January 15, 2014.

Prior to that (as a sweetener!) the company announced the dividend rate for the extension:

As previously announced, Brompton Lifeco Split Corp. (“LCS” or the “Fund”) will hold a special meeting of shareholders on February 18, 2014 to consider the proposed extension of the term of the Class A Shares and Preferred Shares of the Fund. If approved, shareholders will be able to continue their investment in the Fund beyond its currently scheduled termination date of April 30, 2014. The proposed extension will not result in any changes to shareholder redemption rights and is subject to shareholder approval. In the event that the proposed extension is not approved by shareholders, the Fund will terminate and Class A and Preferred shareholders will receive net asset value per Class A and Preferred Share, respectively.

If the extension is approved, the term of the Class A Shares and Preferred Shares will be extended to April 29, 2019 and the distribution rate for the Fund’s Preferred Shares for the new term commencing on May 1, 2014 will be $0.575 per share per annum payable quarterly. This represents a 5.75% yield on the par value ($10.00) of the Preferred Share and is based on current market rates for preferred shares with similar terms. In addition, the Fund intends to maintain the targeted monthly Class A Share distribution at $0.075 per Class A Share.

LCS invests in a portfolio, on an approximately equal weight basis, of common shares of Canada’s 4 largest publicly-listed life insurance companies: Great-West Lifeco Inc., Industrial Alliance Insurance and Financial Services Inc., Manulife Financial Corporation and Sun Life Financial Inc.

The information circular for the term extension was published in January.

LCS.PR.A was placed under Review-Positive by DBRS:

As part of the term extension, the fixed cumulative quarterly distributions to the Preferred Shares will be increased to $0.14375 per preferred share starting May 1, 2014, yielding 5.75% annually on their issue price of $10.00 per share (up from 5.25% previously). Holders of the Class A Shares are expected to continue receiving regular monthly targeted cash distributions of $0.075 per share, yielding 6% annually on their issue price of $15.00 per share. Class A Share distributions were suspended in March 2011, due to the net asset value of the Company falling below $15.00 per unit (i.e., 33% downside protection), but were reinstated in July 2013.

On December 23, 2013, DBRS upgraded the ratings of the Preferred Shares to Pfd-4 (high) from Pfd-5 (high). Since then, the performance of the Company has been generally stable, although downside protection has fallen slightly in April (37.2% as of April 10, 2014). Despite the drop, downside protection remains above levels typically seen at the Pfd-4 (high) level, and as a result, the rating of the Preferred Shares has been placed Under Review with Positive Implications.

The company’s upgrade to Pfd-4(high) by DBRS was reported on PrefBlog. LCS.PR.A is not tracked by HIMIPref™ as it is a very small issue – less than 1.7-million units are outstanding … let’s hope that changes!

This entry was posted on Monday, April 21st, 2014 at 11:45 pm and is filed under Issue Comments. 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.