DBRS Rates GlobalBanc Advantaged 8 Split Corp. at Pfd-2

DBRS has today assigned a new rating of Pfd-2 with a Stable trend to the Preferred Shares issued by GlobalBanc Advantaged 8 Split Corp. (the Company). The Company has raised gross proceeds of $54 million by issuing 2.7 million of Preferred Shares (at $10 each) and an equal amount of Class A Shares (at $10 each) to provide downside protection of approximately 47% to the Preferred Shares (after issuance costs).

The net proceeds from the initial offering will be used to purchase a portfolio of Canadian securities that will be pledged to the National Bank of Canada (the Counterparty) to enter a forward agreement (the Forward Agreement) in order to gain exposure to a portfolio of common shares (the Bank Portfolio) issued by eight of the world’s largest banks -- Citigroup Inc., Bank of America Corp. (DE), Royal Bank of Scotland Group plc, UBS AG, Banco Santander Central Hispano S.A., BNP Paribas, Société Générale Group and Deutsche Bank AG.

Under the terms of the Forward Agreement, the Counterparty will pay to the Company the Canadian-dollar value of the Bank Portfolio through partial settlements to fund distributions, retractions, redemptions and repurchases of Preferred Shares and Class A Shares and to pay any expenses or liabilities of the Company. A minimum of 80% of the Bank Portfolio value will be hedged back to the Canadian dollar for the life of the Forward Agreement.

Holders of the Preferred Shares will receive fixed cumulative quarterly distributions equal to 4.5% per annum. The Company will provide Class A Shareholders with distributions of capital gains when declared by the Board of Directors. Other special distributions may be paid to the Class A Shareholders at the discretion of the administrator, but the Company will not pay a special distribution that lowers the Company net asset value (NAV) to less than $20 per unit unless the distribution is for tax purposes. Based on the most recent dividends paid by its underlying companies, the Bank Portfolio can generate enough yield to pay the fixed preferred distributions and other annual expenses.

The Pfd-2 rating of the Preferred Shares is based on the downside protection available, the dividend coverage ratio being greater than one and the strong credit quality of the Bank Portfolio’s underlying companies. The main constraints to the rating are the following:
(1) The Bank Portfolio’s underlying companies are entirely concentrated in the international banking industry.

(2) Changes in price and dividend policies of the Bank Portfolio’s underlying companies may result in significantly less downside protection being available to the holders of the Preferred Shares.

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

Note:
All figures are in Canadian dollars unless otherwise noted.