DBRS Rates Multi Select Income Trust at Pfd-2 (low)

DBRS has assigned a new rating of Pfd-2 (low) with a Stable trend to the Preferred Securities issued by Multi Select Income Trust (“the Trust"), a split share company that holds a portfolio of Canadian income trusts and funds (the “Portfolio”) comprised of units of Commercial and Industrial Income Trusts (58%), Oil and Gas Income Trusts (22%), and Real Estate Investment Trusts (20%), weighted in respect of the total net asset value (NAV) of the Portfolio at inception. The purchase of the Portfolio was funded through the issuance of $72 million of Preferred Securities and $72 million of Capital Units (the ”Units”) providing the holders of Preferred Securities with a minimum downside protection of 50% as of October 21, 2004. The redemption date of the Preferred Securities and the Units is set on September 30, 2009.

The Portfolio will be actively managed by Sentry Select Capital Corp. (the “Manager”) with a focus on Commercial and Industrial sectors having a diversified exposure to underlying businesses within the sector. The mandate of the Manager is similar to the previous offerings - Diversified Income Trust I and II, both of which have consistently paid out targeted distributions to unitholders since inception. Holders of the Preferred Securities will be entitled to receive fixed, quarterly distributions in an amount that will provide for an annual yield of 6.5% while the unitholders will initially receive monthly distributions to yield 9% per annum. There is an asset coverage test that does not permit any distributions to the unitholders if the NAV of the Portfolio is less than 1.5 times the outstanding principal amount for the Preferred Securities. The current rating of the Preferred Securities is based primarily on the available downside protection, the track record of the Manger, and the diversification of the underlying funds in terms of industry exposure in the Portfolio. The main constraint to the rating is the dependence of the Trust on the value and yield on the underlying Income Funds in the Portfolio that could change from time to time.

Dominion Bond Rating Service (DBRS) will publish a full report shortly that will provide additional analytical detail on this rating action. If you are interested in receiving this report, please contact us at: info@dbrs.com.

Ratings

Back to top