Press Release

DBRS Confirms BNS Split Corp. II Class B Preferred Shares, Series 2 at Pfd-2

Split Shares & Funds
August 23, 2019

DBRS Limited (DBRS) confirmed the rating of the Class B Preferred Shares, Series 2 (the Preferred Shares) issued by BNS Split Corp. II (the Company) at Pfd-2. The Company holds a portfolio (the Portfolio) of common shares of the Bank of Nova Scotia (BNS; rated AA with a Stable trend by DBRS). The dividends received from the Portfolio are used to pay fixed cumulative quarterly distributions to the holders of the Preferred Shares in the amount of $0.1971 per quarter, representing 4.0% per annum on the issue price. Excess dividends net of all expenses of the Company, after the preferred cumulative dividends have been paid to the holders of the Preferred Shares, may be paid as dividends on the Capital Shares or re-invested by the Company in additional BNS shares as determined by the board of directors of the Company. The distributions of dividends on the Preferred Shares may be additionally funded from the sale of the underlying shares. The Company may engage in securities lending to supplement the income generated by the dividends.

As of August 8, 2019, downside protection was 68.2%. The dividend coverage ratio was approximately 3.3 times. Taking into consideration the amount of downside protection available, the dividend coverage and the absence of the grind on the Portfolio, DBRS confirmed the rating of the Preferred Shares at Pfd-2.

As a result of the Company’s partial call completed in September 2018, a total of 22,903 Preferred Shares and 45,806 Capital Shares were redeemed for cash. Approximately 4.87% of both classes of shares were redeemed.

The final redemption date of both classes of shares is September 22, 2020.

The main constraints to the final rating are the following:

(1) The downside protection available to holders of the Preferred Shares depends on the value of common shares of BNS and is subject to share price volatility.

(2) Changes in dividend policy of BNS may result in fluctuations in dividend coverage or downside protection from time to time.

(3) The Portfolio is entirely concentrated in the common shares of BNS.

All figures are in Canadian dollars unless otherwise noted.

The principal methodology is Rating Canadian Split Share Companies and Trusts, which can be found on under Methodologies & Criteria.

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

The rated entity or its related entities did participate in the rating process for this rating action. DBRS 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 or contact us at

DBRS Limited
DBRS Tower, 181 University Avenue, Suite 700
Toronto, ON M5H 3M7 Canada


BNS Split Corp. II
  • US = Lead Analyst based in USA
  • CA = Lead Analyst based in Canada
  • EU = Lead Analyst based in EU
  • UK = Lead Analyst based in UK
  • E = EU endorsed
  • U = UK endorsed
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