Sentry Select 40 Split Income Trust : New issue of preferred securities

Sentry Select has just filed a prospectus for a new fund with some interesting twists.

The fund is based on Income Trusts and will turn into an open-ended mutual fund in two years. The preferred securities are non-callable and will mature in two years – or, to be precise, December 1, 2008 – from the expected closing date of January 5, 2007 … which is just in time to mop up some RRSP money!

The prefs will pay 5.25% and are provisionally rated Pfd-2(low) by DBRS. There will be no distribution to the capital units if this would leave the prefs with asset coverage of less than 1.5:1.

Not the worst issue I’ve ever seen in my life, but 5.25% sounds pretty skimpy compared with what’s already out there – see the current ‘Interest Bearing’ Index for comparisons. Trouble is, of course, there just plain ain’t that many preferred securities around any more, and somebody who wants to buy a hatful … through a full-service brokerage and paying commissions through the nose … might well be pleased to get a big fill.

Due to the short term-to-maturity on these things, I will not be adding them to the HIMIPref™ database – unless forced to do so by outraged hue-and-cry!

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