DBRS has announced that it:
downgraded the rating of the Preferred Shares issued by Brompton Oil Split Corp. (the Company) to Pfd-4 (low) from Pfd-3.
…
Although the majority of the issuers included in the Portfolio are currently rated investment grade with Stable trends, the equity market sell-off during the end of the last year led to a significant downward movement in the level of downside protection available to the Preferred Shares. As at January 15, 2019, the downside protection available to holders of the Preferred Shares was 10%, down from 32% at the end of the third quarter of 2018. The dividend coverage ratio was approximately 0.2 times.
…
Distributions to the Class A Shares are currently suspended due to a decline in the Portfolio’s NAV and the asset coverage test not being met.
As a result of the downside protection dropping below acceptable levels for a prolonged period of time and giving consideration to the time remaining until maturity and weak dividend coverage, DBRS downgraded the rating on the Preferred Shares to Pfd-4 (low).
Both classes of shares are scheduled to mature on March 31, 2020. The board of directors may extend the term of the Company and the shares by successive terms of up to five years, provided that shareholders are given an optional retraction right at the end of each successive term.
When they downgraded the company to Pfd-3 in February 2016, they noted:
As of February 5, 2016, the dividend coverage ratio is 1.36. The downside protection available to holders of the Preferred Shares is approximately 37%.
As of January 22, the NAVPU of OSP / OSP.PR.A was 10.98 (the sum of the Capital Units NAV and the preferred share NAV in Brompton’s new-fangled presentation). The issue commenced trading 2015-2-24 after being announced 2015-1-7.
This four-notch downgrade constitutes a black mark for DBRS. Sure, the NAV didn’t change much from the first downgrade to September 2018 – but the dividend coverage, which they touted as 136% in February 2016, (I haven’t a clue how they calculated that number) was 38% for 2016 and 26% in 2017.
Note that DBRS said dividend coverage was 0.9 times in the initial rating 2015-2-24; approximately 0.3 times in their January, 2017, confirmation and approximately 0.2 times in their January, 2018, confirmation, so it’s possible that the 1.36 times touted in February 2016 was a simple uncorrected typographical error.
This entry was posted on Wednesday, January 23rd, 2019 at 7:41 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed.
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OSP.PR.A Downgraded Four Notches to Pfd-4(low) by DBRS
DBRS has announced that it:
When they downgraded the company to Pfd-3 in February 2016, they noted:
As of January 22, the NAVPU of OSP / OSP.PR.A was 10.98 (the sum of the Capital Units NAV and the preferred share NAV in Brompton’s new-fangled presentation). The issue commenced trading 2015-2-24 after being announced 2015-1-7.
This four-notch downgrade constitutes a black mark for DBRS. Sure, the NAV didn’t change much from the first downgrade to September 2018 – but the dividend coverage, which they touted as 136% in February 2016, (I haven’t a clue how they calculated that number) was 38% for 2016 and 26% in 2017.
Note that DBRS said dividend coverage was 0.9 times in the initial rating 2015-2-24; approximately 0.3 times in their January, 2017, confirmation and approximately 0.2 times in their January, 2018, confirmation, so it’s possible that the 1.36 times touted in February 2016 was a simple uncorrected typographical error.
This entry was posted on Wednesday, January 23rd, 2019 at 7:41 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.