PrefBlog

Partners Value Split Corp. has announced:

that it has entered into an agreement to sell 6,000,000 Class AA Preferred Shares, Series 10 (the “Series 10 Preferred Shares”) to a syndicate of underwriters led by Scotiabank, BMO Capital Markets, CIBC Capital Markets, RBC Capital Markets and TD Securities Inc. on a bought deal basis.

The Series 10 Preferred Shares will be issued at a price of $25.00 per share, for gross proceeds of $150,000,000. The Series 10 Preferred Shares will carry a fixed coupon of 4.70% and will have a final maturity of February 28, 2027. The Series 10 Preferred Shares have a provisional rating of Pfd-2 (low) from DBRS Limited. The net proceeds of the offering will be used to pay a special dividend on the Company’s capital shares.

The Company has granted the underwriters an option, exercisable in whole or part prior to closing, to purchase up to an additional 2,000,000 Series 10 Preferred Shares at the same offering price, which, if exercised, would increase the gross offering size to $200,000,000. Closing of the offering is expected to occur on or about March 2, 2020.

The Company owns a portfolio consisting of 79,740,966 Class A Limited Voting Shares of Brookfield Asset Management Inc. (the “Brookfield Shares”) which is expected to yield quarterly dividends that are sufficient to fund quarterly fixed cumulative preferential dividends for the holders of the Company’s preferred shares and to enable the holders of the Company’s capital shares to participate in any capital appreciation of the Brookfield Shares. Brookfield Asset Management Inc. (“BAM”) is a leading global alternative asset manager with over US$540 billion of assets under management across real estate, infrastructure, renewable power, private equity and credit. BAM owns and operates long-life assets and businesses, many of which form the backbone of the global economy. Utilizing its global reach, access to large-scale capital and operational expertise, BAM offers a range of alternative investment products to investors around the world—including public and private pension plans, endowments and foundations, sovereign wealth funds, financial institutions, insurance companies and private wealth investors. BAM is listed on the New York Stock Exchange and Toronto Stock Exchange under the symbol BAM and BAM.A respectively.

DBRS has assigned a provisional rating of Pfd-2(low) to the issue:

DBRS Limited (DBRS Morningstar) assigned a provisional rating of Pfd-2 (low) to the Class AA Preferred Shares, Series 10 (the Series 10 Preferred Shares) to be issued by Partners Value Split Corp. (the Company) that will rank pari passu with the existing Class AA Preferred Shares, Series 6; the Class AA Preferred Shares, Series 7; the Class AA Preferred Shares, Series 8; and the Class AA Preferred Shares, Series 9 (collectively, the Class AA Preferred Shares).
…
Following the issuance of the Series 10 Preferred Shares, the downside protection available to the Class AA Preferred Shares is expected to be approximately 89% and the dividend coverage ratio is expected to be approximately 2.1 times (x; based on the Canadian-dollar and U.S.-dollar exchange rate as of February 12, 2020)
…
The main constraints to the rating are the following:

(1) The downside protection available to holders of the Class AA Preferred Shares depends solely on the market value of the BAM Shares held in the Portfolio, which will fluctuate over time.

(2) There is a lack of diversification, as the Portfolio is entirely made up of BAM Shares.

(3) Changes in the dividend policy of BAM may result in reductions in Class AA Preferred Share dividend coverage.

(4) As BAM declares dividends in U.S. dollars, the Company is exposed to foreign currency risk relating to the Canadian–U.S. exchange rate, specifically the appreciation of the Canadian dollar versus the U.S. dollar. This may have a negative impact on the dividend coverage ratio of the Class AA Preferred Shares, as these dividends are paid in Canadian dollars.

(5) Downside protection available to the Class AA Preferred Shares may be negatively affected by the retraction of the Junior Preferred Shares.

The issue looks well-priced!

This entry was posted on Friday, February 21st, 2020 at 1:40 am and is filed under New Issues. 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.