DFN.PR.A To Get Bigger

Quadravest has announced:

Dividend 15 Split Corp. (the “Company”) is pleased to announce that it has filed a preliminary short form prospectus in each of the provinces of Canada with respect to an offering of Preferred Shares and Class A Shares of the Company. The offering will be co-led by National Bank Financial Inc., CIBC, RBC Capital Markets and will also include BMO Capital Markets, TD Securities Inc., GMP Securities L.P. and Canaccord Genuity Corp.

The Class A Shares will be offered at a price of $12.00 per Class A Share to yield 10.0% on the issue price and the Preferred Shares will be offered at a price of $10.00 per Preferred Share to yield 5.25% on the issue price. The closing price on the TSX of each of the Class A Shares and Preferred Shares on May 9, 2014 was $12.17 and $10.26, respectively.

Since the Company commenced on March 16, 2004, it has exceeded its distribution objectives. The aggregate dividends paid on Class A shares have been $15.60 per share, representing 121 regular consecutive monthly distributions, plus six special distributions. The Preferred Shares have received a total of $5.31 per share for a combined total distribution of $20.91 per unit paid by the Company. All distributions have been made in tax advantage eligible Canadian dividends or capital gains dividends.

The net proceeds of the secondary offering will be used by the Company to invest in an actively managed portfolio of dividend yielding common shares which includes each of the 15 Canadian companies listed below:

Bank of Montreal Enbridge Inc. TELUS Corporation
The Bank of Nova Scotia Manulife Financial Corp. Thomson-Reuters Corporation
BCE Inc. National Bank of Canada The Toronto-Dominion Bank
Canadian Imperial Bank of Commerce Royal Bank of Canada TransAlta Corporation
CI Financial Corp. Sun Life Financial Inc. TransCanada Corporation

The Company’s investment objectives are:

Preferred Shares:
i. to provide holders of the Preferred Shares with fixed, cumulative preferential monthly cash dividends in the amount of $0.04375 per Preferred Share to yield 5.25% per annum on the original issue price; and
ii. on or about December 1, 2019, to pay the holders of the Preferred Shares the original issue price of those shares.

Class A Shares:
i. to provide holders of the Class A Shares with regular monthly cash dividends initially targeted to be $0.10 per Class A; and
ii. on or about December 1, 2019, to pay the holders of Class A Shares at least the original issue price of those shares.

The sales period of this overnight offering will end at 9:00 a.m. (Toronto time) on May 13, 2014.

A preliminary short form prospectus containing important information relating to the Class A and Preferred Shares has been filed with securities commissions or similar authorities in all provinces of Canada. The preliminary short form prospectus is still subject to completion or amendment. Copies of the preliminary short form prospectus may be obtained from your registered financial advisor using the contact information for such advisor, or from representatives of the underwriters listed above. There will not be any sale or any acceptance of an offer to buy the Class A or Preferred Shares until a receipt for the final short form prospectus has been issued.

Given that the fund’s April 30 Valuation was $20.52, the matched units are hardly a bargain! Flip quickly, boys!!

DFN.PR.A was last mentioned on PrefBlog when they did a secondary offering last September. DFN.PR.A is tracked by PrefBlog, but relegated to the Scraps index on credit concerns.

3 Responses to “DFN.PR.A To Get Bigger”

  1. prefguy says:

    I very much enjoy reading your blog. The preferred share market doesn’t get much attention from the public so it’s nice to be able to read some intelligent thought out opinions. I’m curious what your criteria for a split share is to have credit quality worthy of following for you is?

  2. jiHymas says:

    Basically, Pfd-3(low) or higher from DBRS, but that’s only an approximation; the Credit Rating Agencies determine their rating based on the Probability of Default and completely ignore Loss Given Default.

    LGD will be – basically – 100% for an operating company, but can be 0.1% for a $10.00 Split Share. So looking at credit ratings in isolation can be extremely misleading when comparing operating companies to Split Shares.

    So, for instance, FFN.PR.A and FTN.PR.A are both rated a mere Pfd-4(high), but that doesn’t bother me all that much – I just want a little extra yield after accounting for probable losses due to default. I’ve also been known to recommend LFE.PR.B (Pfd-4(low)) from time to time.

    To get a feel for my analytical approach, I suggest you read my published and public articles about Split Shares:

    Split Shares

    Split Shares and the Credit Crunch

    Split Shares and Monthly Retractions

    Credit Quality of SplitShare Preferreds

    It’s All About Sequence….

    These are all linked in the Publications Category of this blog; feel free to leave comments under the appropriate post if you have questions or criticisms.

    In addition, there are a few newspaper columns for which I was interviewed about SplitShares linked on the Press and Writing page of my corporate website.

  3. prefguy says:

    Thank you for the excellent detailed response re your approach regarding split shares. I treat my DFN.PR.A position as a mostly preferred share with equity market risk. It has slightly higher yield than usually available for a relatively short duration pref share.

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