DBRS Rates NB Split Corp. at Pfd-2 (low)

DBRS has today assigned a new rating to the Preferred Shares issued by NB Split Corp. (NB or the Company) at Pfd-2 (low) with a Stable trend.

The Company is a split share company that holds a portfolio (the Portfolio) of common shares of the National Bank of Canada (NB).

Holders of the Preferred Shares will be entitled to receive fixed, quarterly cumulative distributions for an annual yield of 4.75%. The Company will also pay quarterly distributions to Capital Shares in an amount equal to the excess dividends received on the Portfolio after the distribution payable on the Preferred Shares and expenses.

The rating of the Preferred Shares is based on:
(1) The available downside protection, which is 50% to the principal amount of the outstanding Preferred Shares at closing;
(2) The credit quality and consistency of NB’s dividend distributions; and
(3) Portfolio shares that could be sold to provide liquidity and certainty of dividends to Preferred Shares.

The main constraint to the rating is the dependence of the entire portfolio on the shares of NB for downside protection and dividend income.

The redemption date for both classes of shares will be February 15, 2012.