DBRS Morningstar also confirmed the ratings on the Class AA Preferred Shares, Series 6 (the Series 6 Preferred Shares); Class AA Preferred Shares, Series 7 (the Series 7 Preferred Shares); Class AA Preferred Shares, Series 8 (the Series 8 Preferred Shares), Class AA Preferred Shares, Series 9 (the Series 9); and Class AA Preferred Shares, Series 10 (the Series 10 Preferred Shares; collectively, the Class AA Preferred Shares) at Pfd-2 (low).
The Series 11 Preferred Shareholders will be entitled to receive a quarterly, fixed, cumulative dividend of
The Company owns a portfolio (the Portfolio) of
All series of Class AA Preferred Shares rank senior to the Capital Shares, the Class AAA Preferred Shares, and the Junior Preferred Shares, Series 1 and the Junior Preferred Shares, Series 2 (collectively, the Junior Preferred Shares) and rank pari passu with all other Class AA Preferred Shares with respect to the payment of dividends and repayment of principal.
The Junior Preferred Shareholders are entitled to receive quarterly noncumulative cash distributions at an annual rate of 5% when declared by the board of directors. There is
The Company has issued a limited number of Class A Voting Shares that rank senior to the Class AA Preferred Shares in respect of capital upon the Company's dissolution, winding up, or insolvency. As of
Following the issuance of the Series 11 Preferred Shares, the downside protection available to the Class AA Preferred Shares is expected to be approximately 86.6% and the dividend coverage ratio is expected to be approximately 2.2 times (x; based on the Canadian dollar and
The main constraints to the ratings are the following:
(1) The downside protection available to Class AA Preferred Shareholders depends solely on the market value of BAM Shares held in the Portfolio, which will fluctuate over time.
(2) There is a lack of diversification as the Portfolio is entirely made up of BAM Shares.
(3) Changes in BAM's dividend policy may result in reductions in Class AA Preferred Shares dividend coverage.
(4) As BAM declares dividends inU.S. dollars, the Company is exposed to foreign currency risk relating to the Canadian-U.S. exchange rate, specifically the appreciation of the Canadian dollar versus theU.S. dollar. This may have a negative impact on the dividend coverage ratio of the Class AA Preferred Shares as these dividends are paid in Canadian dollars.
(5) Downside protection available to the Class AA Preferred Shares may be negatively affected by the retraction of the Junior Preferred Shares.
CORONAVIRUS DISEASE (COVID-19)-RELATED ANALYTICAL CONSIDERATIONS
This rating action was based on factors that included additional analysis and, where appropriate, additional assumptions were applied to expected performance as a result of the global efforts to contain the spread of the coronavirus. On
A description of how DBRS Morningstar considers ESG factors within the DBRS Morningstar analytical framework and its methodologies can be found at: https://www.dbrsmorningstar.com/research/357792.
Notes:
All figures are in Canadian dollars unless otherwise noted.
The principal methodology is Rating Canadian Split Share Companies and Trusts (
For more information regarding rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/357883.
For more information regarding structured finance rating methodologies and Coronavirus Disease (COVID-19), please see the following DBRS Morningstar press release: https://www.dbrsmorningstar.com/research/358308.
The related regulatory disclosures pursuant to the National Instrument 25-101 Designated Rating Organizations are hereby incorporated by reference and can be found by clicking on the link under Related Documents or by contacting us at info@dbrsmorningstar.com.
The rated entity or its related entities did participate in the rating process for this rating action. DBRS Morningstar had access to the accounts and other relevant internal documents of the rated entity or its related entities in connection with this rating action.
For more information on this credit or on this industry, visit www.dbrsmorningstar.com or contact us at info@dbrsmorningstar.com.
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Ratings
Date Issued Debt Rated Action Rating Trend Issued
i
US =
CA = Canada Issued, NRSRO
EU = EU Issued, NRSRO
E = EU endorsed
Unsolicited Participating With Access
Unsolicited Participating Without Access
Unsolicited Non-Participating
07-Oct-20 Class AA Preferred Shares, Series 10 Confirmed Pfd-2 (low) -- CA
07-Oct-20 Class AA Preferred Shares, Series 11 Provis.-Final Pfd-2 (low) -- CA
07-Oct-20 Class AA Preferred Shares, Series 6 Confirmed Pfd-2 (low) -- CA
07-Oct-20 Class AA Preferred Shares, Series 7 Confirmed Pfd-2 (low) -- CA
07-Oct-20 Class AA Preferred Shares, Series 8 Confirmed Pfd-2 (low) -- CA
07-Oct-20 Class AA Preferred Shares, Series 9 Confirmed Pfd-2 (low) -- CA
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