DBRS Downgrades GlobalBanc Advantaged 8 Split Corp. Preferred Shares to Pfd-4 (high)

DBRS has today downgraded the Preferred Shares issued by GlobalBanc Advantaged 8 Split Corp. (the Company) to Pfd-4 (high) from Pfd-3 (high) with a Stable trend. The rating had been placed Under Review with Developing Implications on March 19, 2008.

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 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 Corporation (DE), The Royal Bank of Scotland Group plc, UBS AG, Banco Santander SA, BNP Paribas, Société Générale and Deutsche Bank AG.

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. Since inception, the Capital Shareholders have received a total of $0.0485 per share, a return of less than 0.5% of the initial share price.

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 net asset value (NAV).

Since inception, the NAV has dropped from about $19 to $11.95 per share (as of April 15, 2008), a decline of 37%. As a result, the current downside protection available to the Preferred Shareholders is approximately 16%. 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 year 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.

The redemption date for both classes of shares issued is December 15, 2012.

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