Brompton Split Banc Corp. Unveils Strategic Flexibility with $150M ATM Program: A Catalyst for Canadian Banking Exposure and Tax-Efficient Income

Brompton Split Banc Corp. (TSX:SBC) has announced a renewed at-the-market (ATM) equity program that unlocks strategic capital flexibility while maintaining its focus on delivering attractive risk-adjusted returns. With a combined $150 million capacity across its Class A Shares and Preferred Shares, the program positions investors to capitalize on the resilience of top Canadian banks while benefiting from tax-efficient distributions and a clear 2027 maturity timeline. Here’s why this renewal is a compelling call to action for income-seeking investors.

Strategic Capital Flexibility: Fueling Growth Without Fixed Obligations

The renewed ATM program allows Brompton Split Banc Corp. to issue up to $75 million each in Class A Shares (TSX:SBC) and Preferred Shares (TSX:SBC.PR.A) through open-market transactions. This structure provides unparalleled agility, enabling the fund to raise capital efficiently while avoiding the rigid terms of traditional debt or equity offerings. Unlike fixed-term financing, the ATM program’s “pay-as-you-go” approach ensures the company can scale investments in Canadian banks at optimal times, aligning with market conditions.

A Decade of Outperformance: Proof of Portfolio Resilience

Over the past ten years, Brompton Split Banc Corp.’s Class A Shares have delivered a 12.0% annualized total return (NAV-based), outperforming the S&P/TSX Composite Index by 3.7% annually. Meanwhile, the Preferred Shares have returned 5.3% annually, surpassing the S&P/TSX Preferred Share Index by 1.7%. This consistency stems from the fund’s disciplined strategy: a portfolio split equally among the six largest Canadian banks—Royal Bank, Scotiabank, National Bank, TD Bank, CIBC, and BMO—with up to 10% allocated to global financials for diversification.

This equal-weighted approach reduces concentration risk while capitalizing on the stability of Canadian banking giants, which have weathered economic cycles with strong balance sheets and consistent dividend policies.

Tax-Efficient Income: A Dual-Class Advantage

The fund’s dual-share structure offers tailored income solutions:
- Class A Shares: Provide monthly distributions of $0.10 per share, primarily return of capital, ideal for investors prioritizing liquidity and growth.
- Preferred Shares: Deliver fixed cumulative quarterly distributions of $0.15625 per share (6.25% annualized), with eligible dividend status for tax efficiency.

The Preferred Shares also feature a 2027 maturity, guaranteeing the return of the original $10 issue price by November 2027—a powerful catalyst for investors seeking capital certainty.

Downside Protection and 2027 Maturity Catalyst

The Preferred Shares’ fixed distributions and 2027 maturity create a “built-in floor” for investors, reducing exposure to interest rate volatility. Meanwhile, the ATM program’s two-year window (until June 2027) aligns with this maturity date, allowing the fund to strategically raise capital to meet obligations or capitalize on opportunities in the final phase of the Preferred Shares’ lifecycle.

For Class A investors, the fund’s focus on Canadian banks—currently trading at historically low valuations—offers a defensive play in a volatile macro environment. With Canadian banks’ strong capitalization and robust earnings, the portfolio is well-positioned to navigate economic headwinds.

Risks and Considerations

• NAV Discount/Premium Risk: Investors may buy/sell shares at prices differing from NAV.
• Ongoing Costs: Management fees and expenses reduce net returns.
• Market Volatility: Bank stocks can fluctuate with economic conditions.

However, the fund’s 10-year track record, diversified holdings, and tax-advantaged distributions mitigate these risks.

Why Act Now?

The renewed ATM program combines strategic flexibility, proven outperformance, and tax-smart income into a single package. With Canadian banks trading at discounts to their long-term averages and the Preferred Shares’ 2027 maturity fast approaching, this is a rare opportunity to lock in exposure to a resilient sector while optimizing after-tax returns.

Investors should act swiftly to secure positions in Brompton Split Banc Corp.’s shares—whether for the Class A’s growth potential or the Preferred’s income and capital certainty. The ATM program’s structure ensures liquidity, while the fund’s history speaks for itself: a decade of outperformance demands attention.

The Bottom Line: Brompton Split Banc Corp.’s renewed ATM program is a strategic masterstroke. With a $150M capital buffer, a decade of benchmark-beating results, and a 2027 maturity timeline, this vehicle offers investors a rare blend of income, growth, and tax efficiency. Don’t miss the window to capitalize on Canadian banking’s enduring strength.