Brompton Group has announced (on 2023-3-27):
Brompton Oil Split Corp. (the “Fund”) announces its intention to effect a consolidation of its Class A shares. As a result of the special non-concurrent retraction (the “Special Retraction”) granted in connection with the extension of the maturity date of the Fund to March 28, 2024 there will be 950,914 Class A shares and 822,414 Preferred shares outstanding. In order to restore an equal number of outstanding shares of each class following the Special Retraction, the Fund intends to consolidate its Class A shares such that each holder of a Class A share will receive approximately 0.864866854 Class A shares for each Class A share held (the “Share Consolidation”). It is expected that the Class A shares will trade on a post-consolidation basis at the opening of trading on April 11, 2023. The Share Consolidation is subject to approval by the Toronto Stock Exchange (the “TSX”). The value of the Class A shareholders’ holdings will remain the same and as a result, the net asset value (“NAV”) per Class A share, following the Share Consolidation, will increase on a proportionate basis. As at March 24, 2023, the pro forma NAV per Class A share after giving effect to the Share Consolidation would be $2.38 ($2.06 pre consolidation) and the asset coverage ratio for the Preferred shares would increase from 14% to 19%.
The Share Consolidation will allow Class A shareholders to maintain their current investment in the Fund and continue to have enhanced exposure to the Fund’s portfolio. The Fund invests in a portfolio of equity securities of large capitalization North American oil and gas issuers, primarily focused on those with significant exposure to oil. Brompton Funds Limited, the manager of the Fund, believes that the Fund’s investment strategy is well positioned to participate in opportunities that are expected to continue in the energy sector.
No fractional Class A shares will be issued and the number of Class A shares each holder shall receive will be rounded down to the nearest whole number. The Share Consolidation is a non-taxable event.
OSP.PR.A recently recently reset to 8.00% for a one year term and I suppose the fat coupon persuaded many holders to hang on despite the poor credit quality of the issue and the short term until the next reset.
I still don’t get it. Why would you settle for 8% dividend when you can get a 9% + return over two years with issues like dfn.pr.a that offer a much better capital protection?
Does the consolidation mean that the $15.00 NAV distribution hurdle rate be adjusted to reflect the consolidation.