CGI.PR.B & CGI.PR.C: Manager Still Cautious on Capital Unit Dividend

Morgan Meighan has announced (emphasis added):

Canadian General Investments, Limited (the Company) has declared an “estimated” regular quarterly cash dividend of $0.06 per share payable on September 15, 2009 to common shareholders of record at the close of business on September 10, 2009.

The dividend is being filed with the TSX as an “estimated dividend” as a result of a dividend payment restriction contained in the Company’s Class A, Series 2 and Series 3 Preference Share provisions. This restriction provides that the Company shall not pay a dividend on its common shares unless after giving effect thereto, the ratio of its Assets to Obligations (both as defined in the Preference Share provisions) exceeds 2.5 times. Although the coverage ratio as at the close of business on August 31, 2009 was approximately 3.3 times, as a result of market conditions, it is not certain at today’s date whether the Company will still meet the coverage requirement on September 15, 2009.

The Company will make a further announcement regarding payment prior to September 15, 2009. In the event that payment of the common share dividend is deferred, the dividend will be paid to registered shareholders as of the original record date at such later time as the Company determines that it can properly be paid.

The wording follows that of the June declaration (3.0x); March declaration (2.6x) and the December declaration reported on PrefBlog (2.6x).

The caution seems excessive to me, but is prudent. I bet next time they write a prospectus it will be made clear that the asset test applies at the time of declaration, not the time of payment!

CGI.PR.B & CGI.PR.C were last mentioned on PrefBlog when they were downgraded to Pfd-1(low) by DBRS following a methodological change. Both are tracked by HIMIPref™ but are relegated to the “Scraps” index on volume concerns.

One Response to “CGI.PR.B & CGI.PR.C: Manager Still Cautious on Capital Unit Dividend”

  1. […] Capital Unit Dividend Worries […]

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