PrefBlog

DBRS has announced:

confirmed the rating for the Preferred Shares issued by BMONT Split Corp. (the Company) at Pfd-2 (low) with a Stable trend. The rating had been placed Under Review with Developing Implications on March 19, 2008.
…
The holders of the Preferred Shares receive fixed cumulative quarterly distributions equal to 4.5% per annum. The current yield on the BMO Shares provides dividend coverage of approximately 1.7 times. Excess dividends net of all expenses of the Company will be paid as dividends on the Capital Shares or re-invested by the Company in additional BMO Shares as determined by the board of directors of the Company.

The net asset value of the BMO Shares has experienced downward pressure, dropping from $62.49 per share to $46.74 in the last six months, a decline of 25%. The current downside protection available to the Preferred Shareholders is approximately 41%. The confirmation of the Preferred Shares is based on the current level of asset coverage available to cover the Preferred Shares principal, as well as the strong credit quality of BMO (confirmed at AA by DBRS on April 17, 2008).

This is significant – it is the first of the fourteen reviewed financial splits to be confirmed; the other four completed reviews (GBA.PR.A, CBW.PR.A, CIR.PR.A and ASC.PR.A) have all been downgrades.

Downside protection of 41% equates to asset coverage of 1.7:1, which is where it is as of April 17, according to Scotia Managed Companies.. Presumably, the extremely healthy income coverage (also 1.7x) also played an important role in the decision.

BMT.PR.A is tracked by HIMIPref™. It is in the “Scraps” index, due to low volume.

This entry was posted on Thursday, April 24th, 2008 at 5:34 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.