DBRS Confirms Faircourt Split Trust 6.25% Preferred Securities at Pfd-3 (low)

DBRS has today confirmed the rating of Pfd-3 (low) on the 6.25% Preferred Securities (the Preferred Securities) issued by Faircourt Split Trust (The Trust).

On September 30, 2010, the merger of Faircourt Income & Growth Split Trust (FIG) into Faircourt Split Trust (FCS) was completed. Faircourt Asset Management Inc. (Faircourt) was the manager for both FIG and FCS. All of the FCS 5.75% Preferred Securities were repaid at $10 per security plus accrued and future interest. All of the FIG Preferred Securities were exchanged for the new series of 6.25% Preferred Securities issued by FCS. A rating of Pfd-3 (low) was assigned to the new FCS 6.25% Preferred Securities, primarily based on the downside protection available (32% as of October 5, 2010) and the diversification of the Trust’s investment portfolio (the Portfolio).

From October 2010 to August 2011, the performance of the Trust was fairly stable, with downside protection fluctuating between 32% and 40%. The Trust’s net asset value (NAV) experienced downward pressure in September 2011 and the current downside protection available to holders of the Preferred Securities was approximately 27% (as of September 30, 2011). Today’s rating confirmation of the Preferred Securities is based on (1) the downside protection available; (2) testing of NAV floors for targeted and special distributions; and (3) the diversification of the underlying assets included in the Portfolio.

The main constraints to the rating are (1) The Trust’s dependence on the value and dividend policies of the securities in the investment portfolio and (2) the reliance on the manager to generate a high yield on the investment portfolio to meet distributions and other trust expenses without having to liquidate portfolio securities.

The 6.25% Preferred Securities are scheduled to mature on December 31, 2014.

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

The applicable methodology is Rating Canadian Split Share Companies and Trusts, which can be found on our website under Methodologies.