Partners Value Split Corp. has announced (but not on their website because they’re lazy):
that it has entered into an agreement to sell 5,000,000 Class AA Preferred Shares, Series 18 (the “Series 18 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 18 Preferred Shares will be issued at a price of $25.00 per share, for gross proceeds of $125,000,000. The Series 18 Preferred Shares will carry a fixed coupon of 5.30% and will have a final maturity of September 29, 2033. The Series 18 Preferred Shares have a provisional rating of Pfd-2 from DBRS Limited. The net proceeds of the offering will be used by the Company to make distributions to the holder of 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 1,000,000 Series 18 Preferred Shares at the same offering price, which, if exercised in full, would increase the gross offering size to $150,000,000. Closing of the offering is expected to occur on or about October 15, 2026.
The Company owns a portfolio consisting of approximately 179 million Class A Limited Voting Shares of Brookfield Corporation and approximately 25 million Class A Limited Voting Shares of Brookfield Asset Management Ltd. (collectively, the “Brookfield Securities”), which are expected to yield quarterly dividends that are sufficient to fund quarterly fixed cumulative preferential dividends for the holders of the Company’s preferred shares and to enable the holders of the Company’s capital shares to participate in any capital appreciation of the Brookfield Securities.
DBRS has assigned:
a provisional credit rating of (P) Pfd-2 to the Class AA Preferred Shares, Series 18 (the Series 18 Preferred Shares) to be issued by Partners Value Split Corp. (the Company). The Series 18 Preferred Shares will rank pari passu with the existing Class AA Preferred Shares, Series 10; the Class AA Preferred Shares, Series 12; the Class AA Preferred Shares, Series 13; the Class AA Preferred Shares, Series 14; the Class AA Preferred Shares, Series 15; the Class AA Preferred Shares, Series 16; and the Class AA Preferred Shares, Series 17 (collectively, the Class AA Preferred Shares).
The Series 18 Preferred Shares will be entitled to a fixed quarterly cumulative preferential dividend of [$] per share to yield [%] per annum on the issue price of $25.00. The maturity date for the Series 18 Preferred Shares will be September 29, 2033. Prior to the issuance of the Series 18 Preferred Shares, the Company will subdivide the existing Capital Shares, so that after the closing of the offering, the aggregate number of preferred shares (Class AA Preferred Shares and Junior Preferred Shares) outstanding and the aggregate number of Capital Shares outstanding will be equal.
The Company’s investment objective is to hold a portfolio (the Portfolio) of Class A Limited Voting Shares of Brookfield Corporation (the BN Class A Shares; Brookfield Corporation’s Issuer Rating is “A” with a Stable trend, and the credit rating on its Preferred Shares is Pfd-2 with a Stable trend). Brookfield Corporation was formerly known as Brookfield Asset Management Inc. (Brookfield). On December 9, 2022, Brookfield completed its public listing and distribution of a 25% interest in its asset management business, through Brookfield Asset Management Ltd. (BAM) by way of a plan arrangement. As a result of this plan arrangement, the Company received one Class A Limited Voting Share of BAM (the BAM Class A Shares, collectively with the BN Class A Shares, the Brookfield Shares) for every four BN Class A Shares it held. Currently, the Company holds 179,417,173 BN Class A Shares and 24,902,862 BAM Class A Shares.
On May 26, 2026, BN and Brookfield Wealth Solutions Ltd. (BWS) announced that their respective boards of directors approved a transaction (the Transaction) pursuant to which the businesses of BN and BWS will be consolidated under one company (Brookfield Corporation Ltd.). Pursuant to the Transaction, holders of BN shares will exchange each of their BN shares for (1) one Class A Share of Brookfield Corporation Ltd. (the Brookfield Corporation Ltd. Class A Shares), (2) one exchangeable share of Brookfield Canada Corporation (the Brookfield Canada Corporation Exchangeable Shares), which will be exchangeable at any time on a one-to-one basis for one Brookfield Corporation Ltd. Class A Share, or (3) a combination of the foregoing. The Brookfield Corporation Ltd. Class A Shares and the Brookfield Canada Corporation Exchangeable Shares will have the same voting and economic entitlements as the BN Shares and will receive quarterly distributions equivalent to the distributions currently paid by BN on the BN Shares. The Transaction is expected to close by year-end, subject to receipt of all applicable regulatory approvals.
Dividends received from the Portfolio are used to fund the payment of interest on the debentures to the extent that any have been issued and to fund the payment of dividends on the Class AA Preferred Shares. There are currently no debentures outstanding.
The Company has issued a limited number of Class A Restricted Voting Shares and Class B Restricted Voting Shares that rank senior to the Class AA Preferred Shares in respect of capital upon the dissolution, wind-up, or insolvency of the Company. There are currently 100 Class A Restricted Voting Shares outstanding with a book value of USD 8,000 and 1,000 Class B Restricted Voting Shares outstanding with a book value of USD 800.
Each series of Class AA Preferred Shares ranks pari passu with all other Class AA Preferred Shares and senior to the following:
— the Class AAA Preferred Shares;
— the Junior Preferred Shares, which currently consists of the Junior Preferred Shares, Series 5; and
— the Capital Shares, with respect to payment of dividends and repayment of principal.There are currently no Class AAA Preferred Shares outstanding. The Junior Preferred Shareholders are entitled to receive quarterly noncumulative cash distributions at an annual rate of 5% when declared by the Board. There is $150 million worth of Junior Preferred Shares currently outstanding. The Company’s Capital Shareholders will only receive excess dividend income after interest on the debentures, Class AA Preferred Share distributions, Junior Preferred Share distributions, and other Company expenses have been paid, provided that the net asset value (NAV) per unit (one unit comprises one Capital Share and either one Class AA Preferred Share or one Junior Preferred Share) exceeds $36.00.
Any capital appreciation of the Brookfield Shares will benefit the Capital Shareholders, which rank junior to all preferred shares of any class or series.
Following the issuance of the Series 18 Preferred Shares, the downside protection available to the Class AA Preferred Shares is expected to be approximately 88.4%, and the dividend coverage ratio is expected to be higher than 1.0 times (x; based on the Canadian dollar and U.S. dollar exchange rate as of October 1, 2026). If the underwriters’ overallotment option is exercised, the downside protection is expected to be 88.1% and the dividend coverage is expected to exceed 1.0x. Because of the excess-only nature of both Junior Preferred Shares and Capital Share dividends, there is no grind on the Portfolio.
As the Brookfield Shares receive 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 (except for the dividends on the Series 16 Preferred Shares and the Series 17 Preferred Shares) are paid in Canadian dollars. In the event of a shortfall, the Company may sell some of the Portfolio’s securities, engage in security lending, or write covered call options to generate sufficient income to satisfy its obligations to pay the Class AA Preferred Shares’ dividends. If the Company chooses to lend its holdings, the Portfolio would be exposed to potential losses should a borrower default on its obligation to return the borrowed securities. The Class AA Preferred Shares, excluding the Series 16 Preferred Shares and the Series 17 Preferred Shares, are exposed to currency risk for the return of their principal at maturity. However, this risk is mitigated by the current level of downside protection of 88.4%.
The main constraints to the credit rating are the following:
— The downside protection available to the Class AA Preferred Shareholders depends solely on the market value of the Brookfield Shares held in the Portfolio, which will fluctuate over time.
— There is a lack of diversification, as the Portfolio is entirely made up of Brookfield Shares.
— Changes in the dividend policy of Brookfield Corporation and BAM may result in reductions in the Class AA Preferred Shares’ dividend coverage.
— As the Brookfield Shares receive 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 (except for the dividends on the Series 16 Preferred Shares and the Series 17 Preferred Shares) are paid in Canadian dollars.
— The Class AA Preferred Shares, excluding the Series 16 Preferred Shares and the Series 17 Preferred Shares, are exposed to currency risk for the return of their principal at maturity. However, this risk is mitigated by the current level of downside protection of 88.4%.Morningstar DBRS’ credit rating on the Series 18 Preferred Shares addresses the credit risk associated with the identified financial obligations in accordance with the relevant transaction documents. The associated financial obligations are the quarterly fixed cumulative preferential dividends and the return of principal on the maturity date.
Morningstar DBRS’ credit rating does not address nonpayment risk associated with contractual payment obligations contemplated in the applicable transaction document(s) that are not financial obligations.