FFN.PR.A Downgraded to Pfd-4(high) by DBRS

Four and a half months after downgrading FTN.PR.A (which is a significantly better credit), DBRS has finally gotten around to downgrading FFN.PR.A to the same level:

DBRS has today downgraded the rating of the Preferred Shares issued by Financial 15 Split Corp. II (the Company) to Pfd-4 (high) from Pfd-3 (low).

In September 2004, the Company issued 6.4 million Preferred Shares (at $10 each) and an equal number of Class A Shares (at $15 each). Although these shares were offered separately, together they form a Unit. The redemption date for both classes of shares issued was initially December 1, 2009, but was extended to December 1, 2014, at a special meeting of shareholders in April 2007.

On September 6, 2011, DBRS confirmed the ratings on the Preferred Shares at Pfd-3 (low) due to the fairly stable level of downside protection available to holders of the Preferred Shares, despite the NAV and downside protection decreasing gradually in the months leading up to the confirmation. However, the downside protection continued to decline after the rating confirmation until the beginning of the first quarter of 2012. From January to March 2012, the NAV has experienced some recovery, but the downside protection has not increased significantly enough over the past few months to offset its previous underperformance. Furthermore, the downside protection declined again in April to 26.1% due to the negative performance of most financial institutions in the Portfolio. The dividend coverage ratio is currently around 0.56, which results in a grind on the Portfolio. As a result, the rating has been downgraded to Pfd-4 (high).

The scheduled final maturity date of the Preferred Shares is December 1, 2014. DBRS will continue to closely monitor changes in the credit quality of the Preferred Shares and provide rating updates as required.

On 2012-4-30 the NAV of FFN.PR.A was 13.54 (the equivalently rated FTN.PR.A’s NAV was 14.41).

FFN.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

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