DBRS has announced:
DBRS Limited (Morningstar DBRS) withdrew its credit rating on the Cumulative Redeemable Series 2 Preferred Units (the Series 2 Preferred Units) issued by Canoe EIT Income Fund (the Fund).
In April 2018, the Fund issued 3,200,000 Series 2 Preferred Units at a price of $25.00 per unit for gross proceeds of approximately $80.5 million. Under the terms of the issuance, the Series 2 Preferred Units are retractable for cash at $25.00 per unit at the option of the holder on or after March 15, 2025. Morningstar DBRS withdrew its credit rating on the Series 2 Preferred Units as the credit rating assigned reflects the credit risk up to the beginning date of the retraction option of March 15, 2025. On and after March 15, 2025, investors have been able to submit for retraction their Series 2 Preferred Units and have received their principal back and related accrued and unpaid distributions in accordance with the terms of issuance. There are still approximately 2.9 million Series 2 Preferred Units outstanding, as not all investors have exercised their retraction option.
The Fund is a closed-end, actively managed investment trust focused on a broad range of income-producing investments in various industries, currencies, and geographic regions. The Fund’s portfolio (the Portfolio) is broadly diversified, with investments in the financial sector, representing 29.1% of the total Portfolio as of December 31, 2025, energy (19.9%), industrials (17.7%), and information technology (8.9%). Investments in the materials, consumer discretionary, healthcare, consumer staples and communication services sectors represented the remaining 24.4%. The Fund is exposed to foreign exchange risk as some of the securities held in the Portfolio are denominated in currencies other than the Canadian dollar. The U.S. dollar exposure is partially hedged with borrowings in the same currency. The Fund may enter into foreign exchange contracts to further mitigate currency exchange risk.
The Series 2 Preferred Unit holders receive quarterly cumulative preferential cash distributions of $0.30 representing a 4.80% annual return on the issue price of $25.00. The distributions are mainly funded through income received from the income-generating securities in the Portfolio. Holders of the Fund Units (the Units) currently receive targeted monthly cash distributions of $0.10, amounting to $1.20 per year. The Fund is required to distribute any net income and realized capital gains prior to the end of its taxation year. No distributions can be declared or paid on any equity securities ranking by their term junior to the Preferred Units, nor can they be purchased for cancellation or redeemed pursuant to their terms, unless all distributions are current on all the series of the Preferred Units.
As of January 16, 2026, the downside protection available to the Series 2 Preferred Units was 92.3% with an asset coverage ratio of 12.9 times (x) and a dividend coverage higher than one time. To supplement the Portfolio income, the Fund can engage in covered call option and put option writing on all or a portion of the shares held in the portfolio.
Morningstar DBRS’ credit rating on the applicable classes addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. Where applicable, a description of these financial obligations can be found in the transactions’ respective press releases at issuance.
Similar action was taken with respect to EIT.PR.A a year ago.