DBRS Downgrades GlobalBanc Advantaged 8 Split Corp. Preferred Shares to Pfd-3 (high)

DBRS has today downgraded the Preferred Shares issued by GlobalBanc Advantaged 8 Split Corp. (the Company) from Pfd-2 to Pfd-3 (high) with a Stable trend.

In June 2007, the Company raised gross proceeds of $54 million by issuing 2.7 million 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 redemption date for both classes of shares issued is December 15, 2012 (the Redemption Date).

The net proceeds from the initial offering were used to purchase a portfolio of Canadian securities that were 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 pays 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, as well as 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 receive fixed cumulative quarterly distributions equal to 4.5% per annum. The Company provides Class A Shareholders with distributions of capital gains when declared by the Board of Directors, 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. However, changes in dividend policy by any of the banks included in the Bank Portfolio could cause a potential grind on the NAV.

Since inception, the NAV has dropped from about $19 to $14.29 per share (as of January 10, 2008), a decline of nearly 25%. As a result, the current downside protection available to the Preferred Shareholders is approximately 30%. The decline in NAV can be attributed to the Bank Portfolio’s 100% concentration in the international banking industry. In general, the valuations of the common shares of international banks have experienced significant volatility over the last few months due to credit concerns and large writedowns.

The downgrade of the Preferred Shares is based on the lower level of asset coverage available to cover the Preferred Shares principal.

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