{"id":51958,"date":"2026-05-29T20:44:59","date_gmt":"2026-05-30T00:44:59","guid":{"rendered":"https:\/\/prefblog.com\/?p=51958"},"modified":"2026-05-29T20:45:14","modified_gmt":"2026-05-30T00:45:14","slug":"df-pr-a-upgraded-to-pfd-3-by-dbrs","status":"publish","type":"post","link":"https:\/\/prefblog.com\/?p=51958","title":{"rendered":"DF.PR.A Upgraded to Pfd-3 by DBRS"},"content":{"rendered":"

DBRS has announced<\/a> that it:<\/p>\n

upgraded the credit rating on the Preferred Shares issued by Dividend 15 Split Corp. II (the Company) to Pfd-3 from Pfd-3 (low). The rating upgrade reflects the significant improvement in downside protection for the Preferred Shares over the past year.<\/p>\n

The Company invests in an actively managed portfolio of common shares (the Portfolio) which currently primarily includes securities of the following publicly traded Canadian companies, each of whose securities will generally represent no less than 4% and no more than 8% of the net asset value of the Company: Bank of Montreal, Royal Bank of Canada, Bank of Nova Scotia, Sun Life Financial Inc., BCE Inc, TC Energy Corp., Canadian Imperial Bank of Commerce, TELUS Corporation, Thomson Reuters Corporation, Enbridge Inc, The Toronto-Dominion Bank, Manulife Financial, TransAlta Corporation, National Bank of Canada. The Company may also invest up to 15% of the net asset value in equity securities of issuers other than the companies listed above. In order to supplement the dividends received on the portfolio and to reduce risk, the Company will from time to time write covered call options in respect of some or all of the common shares in the Portfolio. The Portfolio is actively managed by Quadravest Capital Management.<\/p>\n

The Company’s termination date is December 1, 2029. At termination, the holders of the Preferred Shares will be entitled to the value of the Company up to the face amount of the Preferred Shares in priority to the holders of the Class A Shares. Holders of the Class A Shares will receive the remaining value of the Company. The Company’s board of directors can extend the termination date for additional successive terms of five years each, provided that shareholders are given an optional special retraction right in connection with such extension.<\/p>\n

Dividends received from the Portfolio are used to pay fixed cumulative monthly cash distributions. Holders of the Preferred Shares are entitled to receive fixed cumulative preferential monthly cash dividends in the amount of $0.05833 per Preferred Share, yielding 7.00% per annum on the original issue price of $10.00. Holders of the Class A Shares currently receive regular monthly cash distributions, targeted to be $0.10 per Class A Share. Distributions to the Class A Shares are made only if the distributions on the Preferred Shares are not in arrears and the NAV per unit (which consists of one Class A and one Preferred Share) is in excess of $15.00 Distributions for the one-year period ended April 2026 totaled $1.20 per Class A Share.<\/p>\n

On June 20, 2025, the Company renewed its at-market-program that allows the Company to issue shares of the Company to the public from time to time at the Company’s discretion, effective until July 19, 2027, unless terminated prior to such date by the Company. The maximum gross proceeds from the issuance of the shares will be $350,000,000.<\/p>\n

As of May 15, 2026, the downside protection available to holders of the Preferred Shares improved to 47.9% from 35.5% as of April 30, 2025, and the asset coverage was at 1.9 times (x) whereas the projected dividend coverage declined to 0.6x. The dividend coverage below 1.0x indicates that the current dividend income earned by the Company is not enough to fully cover the Company’s operating expenses and targeted distributions on the Preferred Shares. To further supplement the Portfolio income, the Company may engage in covered call and put options writing on all or a portion of the shares held in the Portfolio and\/ or rely on realized capital gains. Without giving consideration to capital appreciation potential or any source of income other than the dividends earned by the Portfolio, the Preferred Share distributions together with the current distributions on the Class A Shares will create a projected grind on the NAV of the Portfolio of approximately 5.8% per year over the next 5 years.<\/p>\n

Considering the increase in the amount of downside protection available to holders of the Preferred Shares, dividend coverage below 1.0x, the Portfolio diversification and projected grind on the Portfolio, Morningstar DBRS upgraded the credit rating on the Preferred Shares to Pfd-3 from Pfd-3 (low).<\/p>\n

The main constraints to the credit rating are as follows:<\/p>\n

(1) Volatility of price and changes in the dividend policies of the underlying issuers may result in significant reductions in the Preferred Shares’ dividend coverage or downside protection from time to time.<\/p>\n

(2) Dividends and interest received on the Portfolio are currently unable to fully cover distributions on the Preferred Shares.<\/p>\n

(3) The Company relies on the Portfolio manager to generate additional income, through option writing, to meet distributions and other trust expenses without having to liquidate the portfolio’s securities.<\/p>\n

(4) Stated monthly distributions on the Class A Shares will likely create a grind on the portfolio. This risk is mitigated by an asset coverage test of 1.5x that ensures sufficient levels of downside protection to the holders of the Preferred Shares.<\/p><\/blockquote>\n","protected":false},"excerpt":{"rendered":"

DBRS has announced that it: upgraded the credit rating on the Preferred Shares issued by Dividend 15 Split Corp. II (the Company) to Pfd-3 from Pfd-3 (low). The rating upgrade reflects the significant improvement in …<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[13],"tags":[],"class_list":["post-51958","post","type-post","status-publish","format-standard","hentry","category-issue-comments"],"_links":{"self":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/51958","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcomments&post=51958"}],"version-history":[{"count":2,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/51958\/revisions"}],"predecessor-version":[{"id":51960,"href":"https:\/\/prefblog.com\/index.php?rest_route=\/wp\/v2\/posts\/51958\/revisions\/51960"}],"wp:attachment":[{"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fmedia&parent=51958"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Fcategories&post=51958"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/prefblog.com\/index.php?rest_route=%2Fwp%2Fv2%2Ftags&post=51958"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}