PrefBlog

DBRS has announced that it:

placed its rating of the Preferred Units issued by Kingsway Linked Return of Capital Trust, rated at Pfd-3, Under Review with Negative Implications. This action is a result of DBRS placing the ratings of Kingsway Financial Services Inc. and affiliates (the Company) Under Review with Negative Implications on February 9, 2009. This rating action followed the Company’s pre-release of Q4 2008 results.

KSP.UN was issued back in the good old days, when you could issue anything. The prospectus states:

LROC Preferred Unit distributions will consist primarily of returns of capital (which are generally tax-deferred and reduce a Holder’s cost base in the LROC Preferred Units for tax purposes), and may, in certain circumstances, include capital gains distributions.

In order to achieve its investment objectives, the Trust will use the net proceeds of this Offering to subscribe for and purchase all of the limited partnership units (the ‘‘LP Units’’) of KL Limited Partnership (‘‘KL LP’’), a newly created limited partnership organized under the laws of the Province of Ontario, which will, in turn, use the proceeds of such subscription to pre-pay its purchase obligations under a forward securities purchase agreement (the ‘‘Purchase Agreement’’) with The Bank of Nova Scotia, a Canadian chartered bank, the long-term debt of which is currently rated AA- by S&P and AA (low) by DBRS (‘‘BNS’’ or the ‘‘Counterparty’’). The Purchase Agreement will provide exposure to a note (the ‘‘Kingsway Note’’) issued by Kingsway ROC GP, a newly created general partnership organized under the laws of the State of Delaware (‘‘Kingsway ROCGP’’) and unconditionally guaranteed as to payments of principal, interest and other amounts by Kingsway Financial Services Inc. (‘‘Kingsway’’), a corporation incorporated under the laws of the Province of Ontario, and by Kingsway America Inc., a corporation incorporated under the laws of the State of Delaware and a wholly-owned subsidiary of Kingsway (‘‘Kingsway America’’). The longterm debt of Kingsway and Kingsway America is currently rated BBB-by S&P and BBB by DBRS. The Kingsway Note will be owned by Kingsway Note Trust, a newly created investment trust established under the laws of the Province of Ontario (‘‘KN Trust’’). The initial holder of all of the outstanding units of KN Trust will be the Counterparty or an affiliate of the Counterparty.

I will hazard a guess that the Toronto Stock Exchange refused to issue it a “.PR.” symbol due to confusion regarding what it was preferred to; but it got a “Preferred Scale” rating from both DBRS and S&P.

S&P has announced that today it:

lowered its ratings on the linked return of capital (LROC) preferred units issued by Kingsway Linked Return of Capital Trust (see list).

The lowering of these ratings mirrors today’s downgrade of Kingsway ROCGP’s senior unsecured 10-year note, which is linked to the LROC preferred
units.

It’s now rated P-4 by S&P.

KSP.UN was last mentioned on PrefBlog when it was downgraded to Pfd-3 by DBRS.

KSP.UN is not tracked by HIMIPref™.

This entry was posted on Tuesday, February 10th, 2009 at 7:26 pm and is filed under Issue Comments. 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.