PrefBlog

Dominion Bond Rating Service has announced:

has today placed the Pfd-2 (high) rating of the Class B Preferred Shares, Series 1 (the Class B Preferred Shares) issued by Big 8 Split Inc. (the Company) Under Review with Negative Implications.

The Company currently has 1,204,980 Class B Preferred Shares and an equal number of Class A capital shares (the Capital Shares) outstanding. The Class B Preferred Shares receive a fixed cumulative quarterly distribution yielding 7.00% annually on the issue price of $12 per share. The scheduled final maturity date of the Class B Preferred Shares is December 15, 2013.

The Company has filed a preliminary prospectus for the issuance of Class C Preferred Shares, Series 1 (the Class C Preferred Shares; collectively, with the Class B Preferred Shares, the Preferred Shares) and additional Capital Shares. The Company intends to declare and pay a dividend in Capital Shares to the current holders of the Capital Shares. The Company will then offer to issue a greater amount of Class C Preferred Shares than Capital Shares so that there will be an equal number of Capital Shares and Preferred Shares of the Company outstanding. The Class C Preferred Shares will rank pari passu with the Class B Preferred Shares with respect to return of principal and payment of dividends.

As of October 22, 2009, the net asset value (NAV) of the Company was $42.01 per unit, providing downside protection of approximately 71% to the Class B Preferred Shares. The re-leveraging of the Company described above at the time of issuance of the Class C Preferred Shares and additional Capital Shares will result in a lower amount of downside protection being available to the Class B Preferred Shares. Consequently, the rating on the Class B Preferred Shares has been placed Under Review with Negative Implications. Once the Class C Preferred Shares are issued, the Preferred Shares will benefit from the same amount of downside protection. Based on information received from TD Sponsored Companies Inc. (the Administrator and Promoter of the Company) to date, it is expected that the rating on the Class B Preferred Shares will be downgraded to Pfd-2 upon completion of the issuance of Class C Preferred Shares and additional Capital Shares.

The preliminary prospectus is on SEDAR:

A holder retracting Preferred Shares will receive a cash price per Preferred Share retracted equal to the amount, if any, by which 95% of the Unit Value exceeds the aggregate of (i) the average cost to the Company, including commissions, of purchasing a Capital Share in the market; and (ii) $1.00. See “Description of the Securities Distributed – Attributes of the Preferred Shares”.
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Any outstanding Preferred Shares will be redeemed by the Company on December 15, 2013 (the “Redemption Date”) at a price per share (the “Preferred Share Redemption Price”) equal to the lesser of $12.00 and Unit Value.

The Company may also redeem Preferred Shares on December 15 of any year commencing in 2010 at a price per share equal to the Preferred Share Redemption Price to the extent that unmatched Capital Shares have been tendered for retraction under a Special Annual Retraction. See “Description of the Securities Distributed – Attributes of the Preferred Shares”.

In addition, the Board of Directors has the right to redeem the Preferred Shares then outstanding at the next Annual Retraction Payment Date if the market value of the Portfolio Shares held by the Company is $15,000,000 or less for two consecutive Valuation Dates.
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It will be the policy of the Board of Directors of the Company to declare and pay quarterly distributions in an amount equal to the dividends received by the Company on the Portfolio Shares minus the dividends payable on the Company’s preferred shares and all administrative and operating expenses where the dividends on the Portfolio Shares exceed the dividends. It will be the policy of the Board of Directors of the Company to declare and pay quarterly distributions in an amount equal to the dividends received by the Company on the Portfolio Shares minus the dividends payable on the Company’s preferred shares and all administrative and operating expenses where the dividends on the Portfolio Shares exceed the dividends

These terms are heavily weighted weighted against the preferred shareholders (annual redemption possibility at par; poor retraction rights; no NAV test on distributions to Capital Unitholders) but … a fat coupon just might tip the scales. Sadly, the coupon on the new issue is not yet known – but most potential investors will be more interested in the four year term and good credit quality.

BIG.PR.B was last mentioned on PrefBlog when it was upgraded to Pfd-2(high) by DBRS. BIG.PR.B is not tracked by HIMIPref™.

This entry was posted on Thursday, October 29th, 2009 at 8:48 pm and is filed under Issue Comments, New Issues. 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.