Terms

Series

7.875% Series B Fixed-to-Floating Rate Cumulative Preferred Shares

Liquidation Preference

$25.00

Coupon Rate

7.875%

Rate Type

Fixed To Floating

Annual Dividend

$1.97

Payment Frequency

Quarterly

Cumulative

Yes

Perpetual

Yes

Convertible

No

Callable

Yes

First Call Date

April 30, 2028

First Call Price

$25.00

Redemption Notice Period

30 days

Capital Stack Ranking

Junior To: Senior Shares (As Defined In The Share Designation); Pari Passu With: Series A Preferred Shares, Other Parity Preferred Shares; Senior To: Common Shares, Junior Shares

Regulatory (Basel III) Call

No

Tax Classification

Mlp K1

Qualifies for QDI

No

Qualifies for DRD

No

Shares Offered

4,000,000

Prospectus Summary

Compass Diversified Holdings, a Delaware statutory trust that acquires and manages small and middle-market businesses, is offering 4,000,000 shares of its 7.875% Series B Fixed-to-Floating Rate Cumulative Preferred Shares at a $25.00 liquidation preference per share. The shares pay a fixed 7.875% per annum through April 29, 2028, then reset quarterly to three-month LIBOR plus 498.5 basis points. These are cumulative preferred shares, meaning any distributions not paid in a given period accumulate and must be paid in full before common shareholders receive anything — providing meaningful protection against distribution interruption. The Series B Preferred Shares rank senior to the trust's common shares and any other junior shares, and pari passu with the Series A Preferred Shares and any future parity preferred. They are junior to any 'senior shares' as defined in the trust documents. Importantly, this is a holding company structure: the trust owns 100% of Compass Group Diversified Holdings LLC, which in turn owns the operating subsidiaries. All third-party debt sits at the subsidiary level, meaning preferred shareholders are structurally subordinated to the operating companies' creditors. There is no bank regulatory capital trigger; instead, the trust has a Tax Redemption Event provision that allows early redemption at $25.25 per share if a tax event occurs prior to April 30, 2028. At the $25.00 offering price, the fixed-rate yield is 7.875%, equating to approximately $0.4922 per share quarterly (with the first payment of $0.74 on July 30, 2018 covering a longer initial period). Because the trust is treated as a partnership for U.S. federal income tax purposes, holders receive partnership income allocations — distributions are not qualified dividends and do not qualify for the preferential 15%/20% QDI rate or the corporate dividends-received deduction. Payment dates are January 30, April 30, July 30, and October 30. The dividend stopper blocks distributions on common and junior shares if any Series B cumulative distributions remain unpaid, though this restriction does not apply during the initial period ending July 30, 2018.

Summarized from the SEC prospectus filing.

Distribution History

Floating Rate Terms

Ranking vs. Other Preferreds

Dividend Stopper Provisions

Dividend Stopper Description

If all accumulated and unpaid distributions on the Series B Preferred Shares have not been paid, the trust is blocked from paying dividends on its common shares or other junior shares, and from repurchasing common or junior shares; this restriction does not apply during the initial distribution period through July 30, 2018.

Other Preferreds from Compass Diversified Holdings

Div Score Breakdown

Reinvesty's multi-factor safety analysis for this preferred, composite score: 40 (Weak)