PrefBlog

Assiduous Reader PD writes in and informs me of a new issue SplitShare, Big Banc Split Corp., 6%, 3-Year:

Big Banc Split Corp. (the “Company”) is a mutual fund corporation incorporated under the laws of the Province of Ontario. The Company proposes to offer preferred shares (“Preferred Shares”) and class A shares (“Class A Shares”) at a price of $10.00 per Preferred Share and $10.00 per Class A Share (the “Offering”). Preferred Shares and Class A Shares will be issued only on the basis that an equal number of Preferred Shares and Class A Shares will be outstanding at all material times.

The investment objectives for the Preferred Shares are to provide their holders with fixed cumulative preferential monthly cash distributions in the amount of $0.05 per Preferred Share ($0.60 per annum or 6.0% per annum on the issue price of $10.00 per Preferred Share) until November 30, 2023 (the “Maturity Date”) and to return the original issue price of $10.00 to holders on the Maturity Date. See “Investment Objectives”.
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The Company will invest on an approximately equally-weighted basis in a portfolio (the “Portfolio”) of equity securities (the “Portfolio Shares”) of the following publicly traded Canadian banks: Bank of Montreal; Canadian Imperial Bank of Commerce; National Bank of Canada; Royal Bank of Canada; The Bank of Nova Scotia; and The Toronto-Dominion Bank. In order to seek to generate additional returns and enhance the Portfolio’s income, the Manager may write covered call options and cash covered put options in respect of some or all of the Portfolio Shares held in the Portfolio. See “Investment Objectives” and “Investment Strategies”.

The Preferred Shares will not be rated by any rating organization. See “Description of the Securities”. Based on the initial expected net asset value per unit (consisting of one Preferred Share and one Class A Share (each, a “Unit”)), after taking into account offering expenses, the asset coverage ratio based on the Preferred Share original issue price of $10.00 is 190% and the Downside Protection is 47.5%. “Downside Protection” refers to the percentage that the Portfolio would have to decline in value before holders of the Preferred Shares would be in a first-dollar loss position.
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“Maturity Date” means November 30, 2023, subject to extension for successive terms of up to 3 years as determined by the Company’s Board of Directors.
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The policy of the Board of Directors of the Company will initially be to pay monthly noncumulative distributions to the holders of Class A Shares in the amount of $0.067 per Class A Share. Such distributions will be paid on or before the 15th day of the month following the month in respect of which the distribution is declared payable. No distributions will be paid on the Class A Shares (i) if the distributions payable on the Preferred Shares are in arrears, or (ii) if after paying a cash distribution, the NAV per Unit would be less than $15.00.
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Holders of Preferred Shares whose Preferred Shares are surrendered for [monthly] retraction will be entitled to receive a retraction price per Preferred Share equal to the lesser of (i) 95% of the NAV per Unit determined as of such Retraction Date, less the cost to the Company of the purchase of a Class A Share for cancellation; and (ii) $10.00 (the “Preferred Share Retraction Price”).
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On a Maturity Date, a holder of Preferred Shares may retract such Preferred Shares. The Company will provide at least 60 days’ notice by way of a press release to holders of Preferred Shares of such right. The Preferred Shares must be surrendered for retraction by 5:00 p.m. (Toronto time) on the last Business Day of the month prior to the Maturity Date or subsequent maturity date, as applicable. The redemption price payable by the Company for a Preferred Share pursuant to the non-concurrent retraction right will be equal to the lesser of (i) $10.00 plus any accrued and unpaid distributions thereon, and (ii) the Net Asset Value of the Company on the Maturity Date divided by the total number of Preferred Shares then outstanding.

As these securities will not be rated, they will not be tracked by HIMIPref™. As I am always quick to explain, this is not because I worship the Credit Rating Agencies or because I can’t do it myself, but because nobody really cares what Hymas Investment Management Inc. thinks of an issue’s credit quality. Something from the agencies, though, gets the attention of management, directors and thousands of salesmen pretty quickly.

It’s nice to see some competition for Brompton Split Banc Corp., SBC and Canadian Banc Corp, BK.

This entry was posted on Friday, June 19th, 2020 at 8:03 pm and is filed under Issue Comments, 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.