Q: I own ecn.db.b in an RRSP account for income. Would you have concerns that ECN will be able to continue to provide semi-annual payments on this debenture?
5i Research Answer:
ECN is a fairly small company that is not exactly performing well. Cash flow was negative in the most recent 12-month period. Interest charges were $76M last year. It has strong shareholders (insiders and three entities own more than 50%) and is still paying its common dividend of 2.26%. It does have assets it could sell, and could stop its dividend to protect the debentures. Stopping dividends would save $14M. We would not have concerns in the short term, but we do think the debentures need to be considered fairly high risk income overall and likely not great for any conservative income investor.