The rating confirmations are based on the level of downside protection and the distribution coverage ratio on the Preferred Units issued by the Fund as well as the diversification of the Portfolio.
The Fund is a closed-end, actively managed investment trust focused on a broad range of income-producing investments in various industries, currencies, and geographic regions. Holders of the Fund's common units (the Units) have the right to redeem up to 10% of the then-outstanding Units of the Fund once each calendar year. In 2023, 57,843 Units were submitted for redemption, equivalent to 0.03% of the current outstanding Units. As of
The Fund's functional currency is the Canadian dollar. The Fund is exposed to foreign exchange risk as some of the securities held in the Portfolio are denominated in currencies other than the Canadian dollar. As of
The Fund allows borrowing of up to 20% of the value of total assets after giving effect to the borrowing. The Fund has a prime broker arrangement for its lending requirements. Under this arrangement, the Fund has access to a margin facility that permits the Fund to buy and sell securities on margin in Canadian and
The Preferred Unit holders receive quarterly cumulative preferential cash distributions of
The Fund has the ability to issue additional Units through an at-the-market equity program (ATM Program). In
As of
The main constraints to the ratings are the following:
(1) Volatility in stock prices along with changes in the dividend policies of the underlying issuers may result in significant reductions in the Preferred Units' dividend coverage or downside protection from time to time.
(2) The potential grind on the Portfolio arising from redemption rights and distributions to the Units.
(3) The foreign-exchange risk as a result of no hedge on some investments in foreign currencies.
(4) The priority of the amounts owed to the Custodian under the prime broker arrangement over the Fund's assets up to the amount of credit outstanding.
ENVIRONMENTAL, SOCIAL, GOVERNANCE CONSIDERATIONS
There were no Environmental/Social/Governance (ESG) factors that had a significant or relevant effect on the credit analysis.
A description of how Morningstar DBRS considers ESG factors within the Morningstar DBRS analytical framework can be found in the Morningstar DBRS Criteria: Approach to Environmental, Social, and Governance Risk Factors in Credit Ratings at https://dbrs.morningstar.com/research/427030 (
Notes:
All figures are in Canadian dollars unless otherwise noted.
The principal methodology applicable to the credit rating is Rating Canadian Split Share Companies and Trusts (
Other methodologies referenced in this transaction are listed at the end of this press release.
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-DBRS@morningstar.com.
The credit rating was initiated at the request of the rated entity.
The rated entity or its related entities did participate in the credit rating process for this credit rating action.
Morningstar DBRS had access to the accounts, management, and other relevant internal documents of the rated entity or its related entities in connection with this credit rating action.
This is a solicited credit rating.
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The credit rating methodologies used in the analysis of this transaction can be found at: https://dbrs.morningstar.com/about/methodologies.
A description of how Morningstar DBRS analyzes structured finance transactions and how the methodologies are collectively applied can be found at: https://dbrs.morningstar.com/research/410863.
For more information on this credit or on this industry, visit dbrs.morningstar.com or contact us at info-DBRS@morningstar.com.
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