How might the extension impact the fund’s credit rating or perceived credit risk?

Impact on credit rating / perceived credit risk

Extending the maturity of the Class A and Preferred Shares to 2031 does not automatically change the Fund’s formal credit rating, but it does send a signal to rating agencies and investors about the underlying credit profile. An extension means the Fund will have to service the same amount of capital for an additional five years, which lengthens the period over which the underlying infrastructure assets must generate sufficient cash flow to meet the 10.2 % distribution target. If the fund’s portfolio is already generating stable, inflation‑linked cash flows, the extension may be viewed as a prudent “run‑off” strategy that reduces the risk of a forced liquidation at the original 2026 date, thereby moderately improving perceived credit risk. Conversely, because the extension locks in a relatively high yield (10.2 % on the August‑11 price) and postpones any re‑pricing of the Preferred‑share dividend until 2026, rating agencies may view the longer exposure as an added credit‑risk cushion: the Fund must now sustain a higher cost of capital for a longer horizon, which can be a red flag if the asset base underperforms or if market yields for similar‑term preferreds rise sharply.

Trading implications

• Watch the dividend‑rate announcement (due at least 60 days before the original 2026 maturity). If the announced rate is significantly higher than current market yields for comparable preferreds, the implied cost of capital will rise and could trigger a downgrade or a widening of the preferred‑share spread, creating a short‑term sell pressure. A lower‑than‑expected dividend would signal improved cash‑flow expectations and could support the share price and keep spread compression.

• Technical cue: PWI is currently trading at a premium to its net asset value, reflecting the attractive 10.2 % distribution. If the spread between the preferred‑share yield and the benchmark 10‑year Canadian bond widens beyond ~250 bps, it signals rising perceived credit risk; a contraction back to ~200 bps suggests market confidence. Traders can consider a long‑preferred‑share position if the spread narrows (price appreciation) and short or hedge if the spread widens sharply (potential rating pressure).

• Fundamental monitor: Keep an eye on the Fund’s asset‑level performance (e.g., cash‑flow generation from renewable projects) and any rating agency commentary (S&P, DBRS). A downgrade would likely trigger a drop in the preferred‑share price and a surge in the discount to NAV, offering a tactical entry point for yield‑seeking investors but also a higher credit‑risk exposure. In short, the extension itself is neutral to rating but adds duration risk; traders should base positions on the forthcoming dividend decision, spread movement, and any rating‑agency updates.