IFC.PR.F Soft on Muted Volume

August 19th, 2017

Intact Financial Corporation has announced:

that it has closed its previously announced bought deal offering of 6,000,000 Class A Series 6 Preferred Shares (the “Series 6 Shares”) (the “Offering”) underwritten by a syndicate of underwriters (the “Underwriters”) led by CIBC Capital Markets together with BMO Capital Markets, National Bank Financial and TD Securities Inc., resulting in gross proceeds to IFC of $150 million.

The net proceeds from the Offering are intended to be used by IFC to fund a portion of the purchase price for its previously announced acquisition (the “Acquisition”) of all of the issued and outstanding shares of OneBeacon Insurance Group, Ltd. (“OneBeacon”). The closing of the Acquisition is expected to occur in the third quarter or early fourth quarter of 2017 and is subject to receipt of required regulatory approvals. If the Acquisition is not completed, the net proceeds of this Offering will be used for general corporate purposes.

Each Series 6 Share entitles the holder thereof to receive quarterly non-cumulative preferential cash dividends, if, as and when declared by the Board of Directors, on the last day of March, June, September and December in each year at a rate equal to $0.33125 per share. The initial dividend, if declared, will be paid on December 29, 2017 and will be $0.49007 per share.

The Series 6 Shares will commence trading today on the Toronto Stock Exchange under the symbol IFC.PR.F.

IFC.PR.F is a Straight Perpetual, 5.30%, announced 2017-08-09. It will be tracked by HIMIPref™ and assigned to the DeemedRetractibles sub-index.

As this issue is not NVCC compliant, it will be analyzed as a DeemedRetractible. Note, however, that this carries more uncertainty than it does with most other insurers because Intact is a P&C insurer, not a life company.

The issue traded 259,384 shares on its opening day of 2017-8-18 in a range of 24.75-94 before closing at 24.82-83. Vital Statistics are:

IFC.PR.F Deemed-Retractible YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.82
Bid-YTW : 5.46 %

August 18, 2017

August 19th, 2017

Sorry it’s late!

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.4486 % 2,356.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.4486 % 4,324.0
Floater 3.67 % 3.71 % 114,552 18.00 3 -0.4486 % 2,491.9
OpRet 0.00 % 0.00 % 0 0.00 0 0.1877 % 3,073.3
SplitShare 4.74 % 4.19 % 56,196 3.77 5 0.1877 % 3,670.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1877 % 2,863.6
Perpetual-Premium 5.42 % 4.91 % 61,328 5.90 17 -0.1093 % 2,773.9
Perpetual-Discount 5.33 % 5.36 % 63,977 14.86 20 -0.0128 % 2,918.0
FixedReset 4.40 % 4.44 % 148,887 6.37 98 0.1172 % 2,371.6
Deemed-Retractible 5.08 % 5.46 % 112,193 6.06 31 0.0210 % 2,863.4
FloatingReset 2.63 % 3.12 % 42,781 4.21 9 -0.2041 % 2,610.9
Performance Highlights
Issue Index Change Notes
RY.PR.O Perpetual-Premium -1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-18
Maturity Price : 24.37
Evaluated at bid price : 24.79
Bid-YTW : 4.94 %
SLF.PR.J FloatingReset -1.19 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 16.55
Bid-YTW : 8.34 %
BAM.PR.R FixedReset 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-18
Maturity Price : 19.76
Evaluated at bid price : 19.76
Bid-YTW : 4.62 %
IFC.PR.A FixedReset 1.13 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.65
Bid-YTW : 7.13 %
TRP.PR.C FixedReset 1.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-18
Maturity Price : 16.28
Evaluated at bid price : 16.28
Bid-YTW : 4.44 %
Volume Highlights
Issue Index Shares
Traded
Notes
IFC.PR.F Deemed-Retractible 259,384 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.82
Bid-YTW : 5.46 %
CM.PR.Q FixedReset 33,200 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-18
Maturity Price : 22.53
Evaluated at bid price : 23.15
Bid-YTW : 4.47 %
TD.PF.G FixedReset 30,600 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.75
Bid-YTW : 3.56 %
CU.PR.C FixedReset 16,981 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-18
Maturity Price : 21.31
Evaluated at bid price : 21.31
Bid-YTW : 4.54 %
MFC.PR.R FixedReset 15,834 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.61
Bid-YTW : 4.18 %
PVS.PR.C SplitShare 13,860 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 25.02
Bid-YTW : 3.77 %
There were 6 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
RY.PR.P Perpetual-Premium Quote: 25.26 – 25.72
Spot Rate : 0.4600
Average : 0.2728

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2025-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.26
Bid-YTW : 5.10 %

BAM.PR.N Perpetual-Discount Quote: 21.65 – 22.04
Spot Rate : 0.3900
Average : 0.2190

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-18
Maturity Price : 21.38
Evaluated at bid price : 21.65
Bid-YTW : 5.56 %

RY.PR.L FixedReset Quote: 25.17 – 25.54
Spot Rate : 0.3700
Average : 0.2150

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.17
Bid-YTW : 3.76 %

RY.PR.J FixedReset Quote: 23.00 – 23.35
Spot Rate : 0.3500
Average : 0.2351

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-18
Maturity Price : 22.47
Evaluated at bid price : 23.00
Bid-YTW : 4.45 %

TD.PF.F Perpetual-Premium Quote: 25.07 – 25.38
Spot Rate : 0.3100
Average : 0.1971

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-18
Maturity Price : 24.65
Evaluated at bid price : 25.07
Bid-YTW : 4.91 %

TRP.PR.B FixedReset Quote: 15.08 – 15.43
Spot Rate : 0.3500
Average : 0.2409

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-18
Maturity Price : 15.08
Evaluated at bid price : 15.08
Bid-YTW : 4.45 %

August 17, 2017

August 17th, 2017

The Government of Canada is considering reopening an ultra-long bond issue:

The Government of Canada is considering issuing ultra-long bonds, subject to favourable market conditions, through a reopening of the 2.75% December 1, 2064 ultra-long bond, using a modified auction process. The potential for issuing ultra-long bonds and the option of issuing via auction were highlighted in the Debt Management Strategy for 2017–18.

The additional issuance of bonds in the ultra-long sector is in keeping with the commitment that the Government made in Budget 2017 to reallocate short-term issuance towards long-term bonds in order to lock in low funding costs and reduce refinancing risk.

Any ultra-long bond issuance would be subject to a set of issuance criteria. These criteria include projections of cost savings based on market expectations of interest rates over time and the costs of rolling over short-term funding relative to the constant costs of issuing long-term debt, and indications of sufficient demand for ultra-long bonds.

That said, ultra-long bond issuance remains a tactical funding measure and is not part of the regular bond program. There is no commitment to issue ultra-long bonds and other factors may preclude the Government from issuing these securities, even if the above criteria are met.

To facilitate market preparations for potential ultra-long bond issuances, the Government will consult its primary dealers regarding possible issuance dates and auction sizes. Potential issuance dates during the current quarter will be assessed and potential issuance dates in future quarters will be communicated through quarterly bond schedules posted on the Bank of Canada’s website. If a decision is made to hold an ultra-long bond auction, a Call for Tenders confirming the date and size of the auction will be posted on the Bank of Canada’s website.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.5635 % 2,367.1
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.5635 % 4,343.5
Floater 3.66 % 3.69 % 113,253 18.04 3 -0.5635 % 2,503.2
OpRet 0.00 % 0.00 % 0 0.00 0 0.4556 % 3,067.6
SplitShare 4.69 % 4.28 % 53,789 1.34 5 0.4556 % 3,663.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.4556 % 2,858.3
Perpetual-Premium 5.41 % 4.81 % 63,053 6.10 17 0.0768 % 2,776.9
Perpetual-Discount 5.33 % 5.35 % 66,559 14.86 20 0.0749 % 2,918.3
FixedReset 4.40 % 4.44 % 150,994 6.31 98 0.0979 % 2,368.8
Deemed-Retractible 5.07 % 5.50 % 113,063 6.06 30 0.0000 % 2,862.8
FloatingReset 2.63 % 3.12 % 42,850 4.21 9 0.0919 % 2,616.2
Performance Highlights
Issue Index Change Notes
TRP.PR.C FixedReset -1.83 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-17
Maturity Price : 16.07
Evaluated at bid price : 16.07
Bid-YTW : 4.49 %
SLF.PR.G FixedReset -1.68 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.00
Bid-YTW : 8.59 %
BAM.PR.B Floater -1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-17
Maturity Price : 14.10
Evaluated at bid price : 14.10
Bid-YTW : 3.70 %
TD.PF.D FixedReset 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-17
Maturity Price : 22.60
Evaluated at bid price : 23.27
Bid-YTW : 4.45 %
BAM.PF.G FixedReset 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-17
Maturity Price : 22.74
Evaluated at bid price : 23.49
Bid-YTW : 4.62 %
PVS.PR.E SplitShare 1.19 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-09-16
Maturity Price : 26.00
Evaluated at bid price : 26.42
Bid-YTW : -1.96 %
BAM.PF.D Perpetual-Discount 1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-17
Maturity Price : 22.27
Evaluated at bid price : 22.56
Bid-YTW : 5.50 %
ELF.PR.G Perpetual-Discount 1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-17
Maturity Price : 22.32
Evaluated at bid price : 22.59
Bid-YTW : 5.30 %
MFC.PR.K FixedReset 1.60 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.55
Bid-YTW : 6.16 %
Volume Highlights
Issue Index Shares
Traded
Notes
SLF.PR.I FixedReset 77,476 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.41
Bid-YTW : 5.08 %
IFC.PR.A FixedReset 74,400 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.43
Bid-YTW : 7.31 %
MFC.PR.R FixedReset 59,400 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.78
Bid-YTW : 4.31 %
TD.PR.T FloatingReset 37,149 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.47
Bid-YTW : 2.72 %
RY.PR.Q FixedReset 28,230 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-24
Maturity Price : 25.00
Evaluated at bid price : 26.64
Bid-YTW : 3.61 %
TRP.PR.K FixedReset 17,231 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.81
Bid-YTW : 4.13 %
There were 3 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
EML.PR.A FixedReset Quote: 26.39 – 26.84
Spot Rate : 0.4500
Average : 0.2944

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-17
Maturity Price : 25.00
Evaluated at bid price : 26.39
Bid-YTW : 4.26 %

TRP.PR.C FixedReset Quote: 16.07 – 16.43
Spot Rate : 0.3600
Average : 0.2061

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-17
Maturity Price : 16.07
Evaluated at bid price : 16.07
Bid-YTW : 4.49 %

SLF.PR.G FixedReset Quote: 17.00 – 17.49
Spot Rate : 0.4900
Average : 0.3682

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.00
Bid-YTW : 8.59 %

GWO.PR.G Deemed-Retractible Quote: 24.61 – 25.00
Spot Rate : 0.3900
Average : 0.2777

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.61
Bid-YTW : 5.61 %

MFC.PR.G FixedReset Quote: 23.75 – 24.09
Spot Rate : 0.3400
Average : 0.2431

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.75
Bid-YTW : 5.01 %

RY.PR.J FixedReset Quote: 23.05 – 23.22
Spot Rate : 0.1700
Average : 0.1090

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-17
Maturity Price : 22.50
Evaluated at bid price : 23.05
Bid-YTW : 4.44 %

August 16, 2017

August 17th, 2017

The WSJ has a nice piece titled The Wage Paradox Explained:

So why haven’t wages risen faster amid an increase in hiring and unfilled jobs? One answer is that wages have actually been growing at a faster clip—around 4% to 5%—at least for full-time workers with steady jobs. But new full-time workers who are generally paid less than the retirees they replace are dragging down the average wage increase.

Researchers at the San Francisco Fed this week updated their 2016 paper that disaggregated the wages of full-time workers with steady employment from recent entrants—that is, new workers or those returning to full-time work. Their earlier analysis showed that average wage growth had slowed less than expected during the recession while staying relatively flat during the recovery.

That’s because workers who lost jobs during the recession were generally lower skilled and lower paid, so average weekly wages didn’t fall significantly. However, many of those workers have since been rehired at below-average wages, which has depressed the aggregate.

In prior expansions, wage growth has been driven mostly by continuously full-time employed workers, and the researchers find that’s still the case. Wage growth for these workers is now close to the pre-recession 2007 peak. But there are now many more workers who have been on the labor-force sidelines who are moving to full-time employment, thus creating a drag on wages.

Unfortunately, the San Francisco Fed’s website seems to have collywobbles at the moment so I can’t access the paper.

PerpetualDiscounts now yield 5.34%, equivalent to 6.94% interest at the standard equivalency factor of 1.3x. Long corporates now yield about 3.90%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 305bp, the same as reported on August 9.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.4718 % 2,380.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.4718 % 4,368.1
Floater 3.64 % 3.67 % 117,797 18.10 3 0.4718 % 2,517.4
OpRet 0.00 % 0.00 % 0 0.00 0 -0.2038 % 3,053.7
SplitShare 4.71 % 4.61 % 53,013 3.73 5 -0.2038 % 3,646.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2038 % 2,845.3
Perpetual-Premium 5.41 % 4.86 % 63,679 6.10 17 0.0722 % 2,774.8
Perpetual-Discount 5.33 % 5.34 % 67,208 14.85 20 0.2272 % 2,916.2
FixedReset 4.40 % 4.43 % 154,936 6.33 98 -0.0345 % 2,366.5
Deemed-Retractible 5.07 % 5.49 % 114,669 6.06 30 0.2318 % 2,862.8
FloatingReset 2.63 % 3.12 % 42,320 4.22 9 0.0664 % 2,613.8
Performance Highlights
Issue Index Change Notes
ELF.PR.G Perpetual-Discount -1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-16
Maturity Price : 22.07
Evaluated at bid price : 22.30
Bid-YTW : 5.38 %
MFC.PR.K FixedReset -1.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.21
Bid-YTW : 6.42 %
PVS.PR.E SplitShare -1.10 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-10-31
Maturity Price : 25.00
Evaluated at bid price : 26.11
Bid-YTW : 4.79 %
SLF.PR.G FixedReset 1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.29
Bid-YTW : 8.33 %
BAM.PR.C Floater 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-16
Maturity Price : 14.21
Evaluated at bid price : 14.21
Bid-YTW : 3.67 %
MFC.PR.B Deemed-Retractible 1.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.51
Bid-YTW : 6.52 %
TRP.PR.E FixedReset 1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-16
Maturity Price : 21.48
Evaluated at bid price : 21.84
Bid-YTW : 4.43 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PR.Z FloatingReset 109,700 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.44
Bid-YTW : 2.82 %
TD.PF.H FixedReset 56,410 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-31
Maturity Price : 25.00
Evaluated at bid price : 26.08
Bid-YTW : 3.80 %
TD.PR.T FloatingReset 54,718 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.47
Bid-YTW : 2.72 %
BAM.PR.M Perpetual-Discount 51,700 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-16
Maturity Price : 21.37
Evaluated at bid price : 21.64
Bid-YTW : 5.56 %
NA.PR.C FixedReset 45,161 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-11-15
Maturity Price : 25.00
Evaluated at bid price : 25.07
Bid-YTW : 4.58 %
RY.PR.L FixedReset 41,700 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.18
Bid-YTW : 3.72 %
There were 7 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
ELF.PR.G Perpetual-Discount Quote: 22.30 – 22.95
Spot Rate : 0.6500
Average : 0.4301

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-16
Maturity Price : 22.07
Evaluated at bid price : 22.30
Bid-YTW : 5.38 %

MFC.PR.J FixedReset Quote: 23.40 – 23.81
Spot Rate : 0.4100
Average : 0.2470

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.40
Bid-YTW : 5.24 %

CU.PR.C FixedReset Quote: 21.36 – 21.79
Spot Rate : 0.4300
Average : 0.2848

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-16
Maturity Price : 21.36
Evaluated at bid price : 21.36
Bid-YTW : 4.53 %

BAM.PR.R FixedReset Quote: 19.43 – 19.90
Spot Rate : 0.4700
Average : 0.3724

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-16
Maturity Price : 19.43
Evaluated at bid price : 19.43
Bid-YTW : 4.70 %

NA.PR.X FixedReset Quote: 26.45 – 26.68
Spot Rate : 0.2300
Average : 0.1385

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-15
Maturity Price : 25.00
Evaluated at bid price : 26.45
Bid-YTW : 3.94 %

TRP.PR.K FixedReset Quote: 25.75 – 25.99
Spot Rate : 0.2400
Average : 0.1543

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.75
Bid-YTW : 4.18 %

S&P Upgrades BRF & BEP to P-2(low)

August 16th, 2017

Standard & Poor’s has announced:

  • •We are raising our long-term corporate credit and senior unsecured debt ratings on Brookfield Renewable Partners L.P. (BEP) to ‘BBB+’ from ‘BBB’.
  • •The upgrade follows a revision of our assessment of the company’s relationship with parent Brookfield Asset Management Inc.
  • •We revised our group assessment of BEP to moderately strategic from nonstrategic, resulting in a one-notch uplift from the ‘bbb’ stand-alone credit profile to the final ‘BBB+’ rating.
  • •The stable outlook reflects our expectation that the company will continue to have fairly predictable cash flows due to its long-term contracts from its well-diversified portfolio of generation assets.


S&P Global Ratings today raised its long-term corporate credit rating on Brookfield Renewable Partners L.P. (BEP) to ‘BBB+’ from ‘BBB’. The outlook is stable.

At the same time, S&P Global Ratings raised its senior unsecured debt rating on the company to ‘BBB+’ from ‘BBB’. S&P Global Ratings also raised its global scale preferred stock rating on BEP to ‘BBB-‘ from ‘BB+’, and its Canada scale preferred stock rating to ‘P-2(Low)’ from ‘P-3(High)’. Finally, S&P Global Ratings affirmed its ‘A-2’ short-term corporate credit rating on the company.

The upgrade follows our revision of the group status between BEP and parent Brookfield Asset Management Inc. (BAM), to moderately strategic from nonstrategic following our reassessment of BAM under different criteria (for more information, see the research update on BAM published Aug. 15, 2017, on RatingsDirect). BAM indirectly holds about 60% in BEP and we believe it exerts some level of control through its ownership interest; and exerts some influence as the service provider, where it charges BEP for management, administrative, and advisory services through the master service agreement. All these factors leads us to believe there will be some level of parental support, a key factor our group assessment.

Affected issues are:

BRF.PR.A, BRF.PR.B, BRF.PR.C, BRF.PR.E and BRF.PR.F (These are from Brookfield Renewable Power Preferred Equity Inc., a wholly owned subsidiary of BEP, and pay eligible dividends)

BEP.PR.E, BEP.PR.G, BEP.PR.I and BEP.PR.K (These are from Brookfield Renewable Partners L.P. itself, and pay distributions comprised of return of capital and ordinary income)

August 15, 2017

August 15th, 2017

Maple bonds are having a good year:

Apple raised those funds in the Maple market, where foreign issuers match wits with domestic investors. When the game was over, Apple raised $2.5 billion at a rate of 2.513 per cent.

While the coupon Apple is required to pay represents one term of the financing, investors and issuers also focus on the spread. At 80 basis points above comparable Canada bonds, the spread is at the bottom end of the range that Apple expected to pay when the issue was launched.

The $2.5 billion issue represents the largest single tranche Maple bond issue: it is almost twice as large as the previous record, a $1.3 billion borrowing that Canadian investors provided to brewing company Anheuser-Busch last April. It is also more than what Apple had expected to raise when the deal was launched.

At $2.5 billion the financing is understood to be the largest corporate non-financial borrowing in Canadian history.

Prior to Apple’s record-breaking borrowing, Canadians had invested $8.6 billion in 10 newly issued Maple bonds this year. AT&T raised $1.35 billion via a two-tranche offering; United Parcels raised $750 million; Anheuser-Busch raised a total of $2 billion; Pepsico garnered $750 million, as did Goldman Sachs; while Wells Fargo, Bank of America and Morgan Stanley received $1 billion each. The terms have ranged from five years (Wells Fargo) to 30 years (AT&T and Anheuser-Busch.)

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.9045 % 2,369.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.9045 % 4,347.6
Floater 3.65 % 3.69 % 116,760 18.06 3 0.9045 % 2,505.5
OpRet 0.00 % 0.00 % 0 0.00 0 0.0235 % 3,059.9
SplitShare 4.70 % 4.43 % 53,740 1.34 5 0.0235 % 3,654.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0235 % 2,851.1
Perpetual-Premium 5.42 % 4.89 % 66,205 6.10 17 -0.0628 % 2,772.8
Perpetual-Discount 5.34 % 5.33 % 68,314 14.83 20 -0.0857 % 2,909.5
FixedReset 4.40 % 4.42 % 156,972 6.33 98 -0.2690 % 2,367.3
Deemed-Retractible 5.08 % 5.53 % 113,381 6.07 30 0.0014 % 2,856.2
FloatingReset 2.63 % 3.16 % 40,927 4.22 9 -0.0255 % 2,612.1
Performance Highlights
Issue Index Change Notes
BAM.PR.X FixedReset -1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-15
Maturity Price : 17.02
Evaluated at bid price : 17.02
Bid-YTW : 4.64 %
TD.PF.D FixedReset -1.32 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-15
Maturity Price : 22.53
Evaluated at bid price : 23.15
Bid-YTW : 4.47 %
TRP.PR.E FixedReset -1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-15
Maturity Price : 21.28
Evaluated at bid price : 21.56
Bid-YTW : 4.49 %
BMO.PR.T FixedReset -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-15
Maturity Price : 21.29
Evaluated at bid price : 21.29
Bid-YTW : 4.39 %
MFC.PR.N FixedReset -1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.79
Bid-YTW : 6.07 %
SLF.PR.G FixedReset -1.04 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.11
Bid-YTW : 8.49 %
IFC.PR.A FixedReset -1.01 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.60
Bid-YTW : 7.16 %
BAM.PR.B Floater 1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-15
Maturity Price : 14.20
Evaluated at bid price : 14.20
Bid-YTW : 3.67 %
IAG.PR.A Deemed-Retractible 1.88 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.72
Bid-YTW : 6.28 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.K FixedReset 54,440 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.70
Bid-YTW : 4.23 %
TRP.PR.J FixedReset 44,950 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 26.60
Bid-YTW : 3.64 %
CU.PR.C FixedReset 36,700 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-15
Maturity Price : 21.55
Evaluated at bid price : 21.55
Bid-YTW : 4.49 %
CM.PR.R FixedReset 31,845 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-07-31
Maturity Price : 25.00
Evaluated at bid price : 25.05
Bid-YTW : 4.59 %
MFC.PR.H FixedReset 31,300 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.39
Bid-YTW : 5.13 %
MFC.PR.I FixedReset 28,083 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.92
Bid-YTW : 5.16 %
There were 17 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
PVS.PR.E SplitShare Quote: 26.40 – 26.75
Spot Rate : 0.3500
Average : 0.2408

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-09-14
Maturity Price : 26.00
Evaluated at bid price : 26.40
Bid-YTW : -1.38 %

POW.PR.D Perpetual-Discount Quote: 23.90 – 24.24
Spot Rate : 0.3400
Average : 0.2357

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-15
Maturity Price : 23.63
Evaluated at bid price : 23.90
Bid-YTW : 5.28 %

W.PR.K FixedReset Quote: 25.77 – 26.15
Spot Rate : 0.3800
Average : 0.2794

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-01-15
Maturity Price : 25.00
Evaluated at bid price : 25.77
Bid-YTW : 4.44 %

CCS.PR.C Deemed-Retractible Quote: 23.58 – 23.98
Spot Rate : 0.4000
Average : 0.3076

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.58
Bid-YTW : 6.10 %

TD.PR.Y FixedReset Quote: 24.55 – 24.79
Spot Rate : 0.2400
Average : 0.1500

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.55
Bid-YTW : 3.75 %

CU.PR.D Perpetual-Discount Quote: 23.54 – 23.95
Spot Rate : 0.4100
Average : 0.3214

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-15
Maturity Price : 23.08
Evaluated at bid price : 23.54
Bid-YTW : 5.19 %

KML.PR.A Closes Firm On Good Volume

August 15th, 2017

Kinder Morgan Canada Limited has announced:

that it has completed its previously announced offering of cumulative redeemable minimum rate reset preferred shares, Series 1 (the “Series 1 Preferred Shares”). The Company issued 12,000,000 Series 1 Preferred Shares for aggregate gross proceeds of $300 million through a syndicate of underwriters led by Scotiabank, CIBC Capital Markets, RBC Capital Markets and TD Securities. The transaction was upsized from a base size of 8,000,000 shares as a result of strong investor demand.

“This robust inaugural preferred offering is another testament to the attractiveness of KML’s integrated suite of assets,” said Dax Sanders, the Company’s Chief Financial Officer. “The transaction also represents another important step in financing the Trans Mountain Expansion Project.”

The Company intends to use the proceeds from the offering to indirectly subscribe for preferred units in Kinder Morgan Canada Limited Partnership, which in turn, intends to use such proceeds to, directly or indirectly, finance the development, construction and completion of the Trans Mountain Expansion project and Base Line Terminal project as well as in connection with other potential future growth opportunities, to repay indebtedness and for general corporate purposes.

The Series 1 Preferred Shares will begin trading today on the TSX under the symbol KML.PR.A. S&P and DBRS have assigned this series a rating of P-3 (high) and Pfd-3 (high), respectively. The outstanding principal amount of the series is expected to receive 50 percent equity treatment from S&P and 100 percent equity treatment from DBRS.
Dividends on the Series 1 Preferred Shares are expected to be $1.3125 per share annually, payable quarterly on the 15th day of February, May, August and November, as and when declared by the Board of Directors of the Company, for the initial fixed rate period to but excluding November 15, 2022. The first dividend, if declared, will be payable November 15, 2017, in the amount of $0.3308 per share.

All of the Company’s dividends are designated “eligible dividends” for Canadian income tax purposes.

KML.PR.A is a FixedReset 5.25%+365M525 announced August 3. It will be tracked by HIMIPref™ but relegated to the Scraps subindex on credit concerns.

The issue traded 714,130 shares today in a range of 24.89-00 before closing at 24.98-00. Vital statistics are:

KML.PR.A FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-15
Maturity Price : 23.14
Evaluated at bid price : 24.98
Bid-YTW : 5.18 %

DBRS finalized its Pfd-3(high) rating of the issue.

August 14, 2017

August 14th, 2017

Some interesting, but not particularly surprising, commentary on the effects of the fiduciary rule in the States:

The brokerage business fiercely fought the new retirement advice rule. But so far for Wall Street, it has been a gift.

The rule requires brokers to act in the best interests of retirement savers, rather than sell products that are merely suitable but could make brokers more money. Financial firms decried the restriction, which began to take effect in June, as limiting consumer choice while raising their compliance costs and potential liability.

But adherence is proving a positive. Firms are pushing customers toward accounts that charge an annual fee on their assets, rather than commissions which can violate the rule, and such fee-based accounts have long been more lucrative for the industry. In earnings calls, executives are citing the Department of Labor rule, known varyingly as the DOL or fiduciary rule, as a boon.

Dudley had some good observations on income inequality:

In my view, two main factors are responsible for this pattern of differential wage growth and the resulting increase in wage inequality. First, advances in technology have dramatically changed the nature of work, increasing the skill requirements for many jobs while displacing others. Second, the pace of globalization has accelerated in recent decades, with increased cross-border trade, investment, immigration, and the emergence of global supply chains. Together, these economic forces have contributed to significant job losses in certain sectors, most notably manufacturing. The resulting decline in demand for middle- and lower-skilled workers has resulted in fewer jobs and has depressed wages for many in those industries. Other, less important factors behind the rise in inequality include the decline in private sector labor unions and the falling real value of the minimum wage.

At the same time, technological change and globalization have created jobs in areas such as engineering and software development. Demand has been particularly high for knowledge workers, resulting in strong wage growth in certain sectors. All told, the forces of technological change and globalization have contributed to wage inequality by pushing up wages for those toward the top, and stifling wage growth for workers toward the middle and bottom of the wage distribution. As I have said in previous remarks, we need to do a better job of helping those hurt by globalization.

I call his remarks good, of course, because I agree with them. One thing that might have been mentioned is inefficiency in the creative destruction process. Technology and globalization are bringing down the price of various outputs; in the past, we have seen that these cheaper outputs become inputs to other processes in new sectors, but it takes a while.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 1.4734 % 2,348.1
FixedFloater 0.00 % 0.00 % 0 0.00 0 1.4734 % 4,308.6
Floater 3.69 % 3.72 % 118,260 17.98 3 1.4734 % 2,483.1
OpRet 0.00 % 0.00 % 0 0.00 0 0.1335 % 3,059.2
SplitShare 4.70 % 4.43 % 54,681 1.35 5 0.1335 % 3,653.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1335 % 2,850.5
Perpetual-Premium 5.41 % 4.80 % 66,691 6.04 17 -0.0093 % 2,774.5
Perpetual-Discount 5.34 % 5.34 % 68,451 14.86 20 0.1953 % 2,912.0
FixedReset 4.39 % 4.39 % 159,157 6.34 98 0.1974 % 2,373.7
Deemed-Retractible 5.08 % 5.50 % 114,150 6.07 30 -0.0333 % 2,856.2
FloatingReset 2.63 % 3.17 % 40,735 4.22 9 0.2561 % 2,612.7
Performance Highlights
Issue Index Change Notes
IAG.PR.A Deemed-Retractible -1.76 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.30
Bid-YTW : 6.59 %
RY.PR.O Perpetual-Premium -1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-14
Maturity Price : 24.39
Evaluated at bid price : 24.81
Bid-YTW : 4.93 %
BAM.PR.C Floater 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-14
Maturity Price : 14.00
Evaluated at bid price : 14.00
Bid-YTW : 3.72 %
BAM.PR.B Floater 1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-14
Maturity Price : 14.01
Evaluated at bid price : 14.01
Bid-YTW : 3.72 %
MFC.PR.K FixedReset 1.23 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.42
Bid-YTW : 6.25 %
SLF.PR.I FixedReset 1.25 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.54
Bid-YTW : 4.99 %
TRP.PR.F FloatingReset 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-14
Maturity Price : 19.44
Evaluated at bid price : 19.44
Bid-YTW : 3.40 %
BAM.PR.X FixedReset 1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-14
Maturity Price : 17.25
Evaluated at bid price : 17.25
Bid-YTW : 4.58 %
SLF.PR.H FixedReset 1.69 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.50
Bid-YTW : 6.31 %
BAM.PR.K Floater 2.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-14
Maturity Price : 14.00
Evaluated at bid price : 14.00
Bid-YTW : 3.72 %
Volume Highlights
Issue Index Shares
Traded
Notes
RY.PR.A Deemed-Retractible 66,107 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-09-13
Maturity Price : 25.00
Evaluated at bid price : 25.20
Bid-YTW : -6.63 %
RY.PR.R FixedReset 63,188 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-08-24
Maturity Price : 25.00
Evaluated at bid price : 26.76
Bid-YTW : 3.59 %
GWO.PR.G Deemed-Retractible 51,910 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.62
Bid-YTW : 5.59 %
RY.PR.L FixedReset 50,684 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.18
Bid-YTW : 3.71 %
MFC.PR.I FixedReset 26,579 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.95
Bid-YTW : 5.14 %
BNS.PR.E FixedReset 22,428 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-25
Maturity Price : 25.00
Evaluated at bid price : 26.67
Bid-YTW : 3.65 %
There were 14 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IAG.PR.A Deemed-Retractible Quote: 22.30 – 22.80
Spot Rate : 0.5000
Average : 0.3691

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.30
Bid-YTW : 6.59 %

RY.PR.O Perpetual-Premium Quote: 24.81 – 25.18
Spot Rate : 0.3700
Average : 0.2525

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-14
Maturity Price : 24.39
Evaluated at bid price : 24.81
Bid-YTW : 4.93 %

PWF.PR.O Perpetual-Premium Quote: 25.65 – 26.00
Spot Rate : 0.3500
Average : 0.2499

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-10-31
Maturity Price : 25.25
Evaluated at bid price : 25.65
Bid-YTW : -0.63 %

EML.PR.A FixedReset Quote: 26.50 – 26.81
Spot Rate : 0.3100
Average : 0.2341

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-04-17
Maturity Price : 25.00
Evaluated at bid price : 26.50
Bid-YTW : 4.13 %

TRP.PR.J FixedReset Quote: 26.75 – 26.95
Spot Rate : 0.2000
Average : 0.1274

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 26.75
Bid-YTW : 3.47 %

CU.PR.D Perpetual-Discount Quote: 23.51 – 23.80
Spot Rate : 0.2900
Average : 0.2242

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-08-14
Maturity Price : 23.05
Evaluated at bid price : 23.51
Bid-YTW : 5.20 %

S&P Downgrades AIM To P-4(low)

August 14th, 2017

Standard & Poor’s has announced:

  • •We are lowering our long-term corporate credit rating on Montreal-based Aimia Inc. to ‘BB-‘ from ‘BB+’ based on our view that the company’s business and cash flow would be pressured following Air Canada’s notice that it will not renew its contract with Aimia in 2020.
  • •At the same time, we are lowering our issue-level ratings on the company’s senior secured notes to ‘BB’ from ‘BBB-‘.
  • •We are also lowering our global scale rating to ‘B-‘ from ‘B+’ and our Canada scale rating to ‘P-4(Low)’ from ‘P-4(High)’ on Aimia’s preferred shares.
  • •At the same time, we are removing all our ratings on Aimia from CreditWatch, where they were placed with negative implications May 12, 2017.
  • •The negative outlook reflects our view of the uncertainty associated with the timing and magnitude of reward redemption and potential for lower gross billings; limited visibility of member behavior toward the Aeroplan program; and execution risks associated with the company’s ability to sign-up new partners, sell noncore assets, and meaningfully improve its cost structure.


S&P Global Ratings also lowered its issue-level ratings on the company’s senior secured notes to ‘BB’ from ‘BBB-‘(one notch above the corporate credit rating). The senior secured debt has a ‘2’ recovery rating, indicating our expectation of substantial (70%-90%, rounded estimate 75%) recovery in a default scenario.

At the same time, S&P Global Ratings lowered its global scale rating to ‘B-‘ from ‘B+’ and its Canada scale rating to ‘P-4(Low)’ from ‘P-4(High)’ on the company’s preferred shares.

Finally, S&P Global Ratings removed all of its ratings on Aimia from CreditWatch, where they were placed with negative implications May 12, 2017. The outlook is negative.

The downgrade and negative outlook reflect our view of the significant risks and uncertainty Aimia faces following Air Canada’s previous announcement not to renew the company’s contract with Aimia post-June 2020. We believe this development will likely affect Aimia’s value proposition and pressure the company’s business prospects in the next few years. In our view, the loss of a major anchor redemption partner for the points accumulated by Aimia’s Aeroplan loyalty members will likely reduce the appeal of the Aeroplan program to its financial card partners’ customers. As a result, there is the meaningful risk of reduced gross billings (a proxy for cash revenue) and higher-than-average reward redemption activity (expenses) that could affect the company’s EBITDA for the foreseeable future. Although the near-term results might not reflect these risks, without an attractive airline partner announcement the possibility of a surge in redemption activity through 2020 could reduce Aimia’s cash flow and weaken its liquidity. The company plans to mitigate the risks through Aeroplan-focused initiatives, corporate-level cost cutting, and disposal of unprofitable and noncore assets. However, execution risks associated with cost-cutting initiatives or delay in asset sales could limit Aimia’s ability to support its profitability and financial flexibility.

Our negative outlook on Aimia reflects our view that there is an increased risk on the company’s cash flow and financial flexibility due to the uncertainty associated with rising reward redemptions and reduced gross billings along with limited visibility on member behavior toward the Aeroplan program. Also, the execution risks associated with potential cost savings and asset sales could further weaken the credit measures compared with our forecast scenario.

Affected issues are AIM.PR.A, AIM.PR.B and AIM.PR.C.

This follows the DBRS downgrade to Pfd-5(high) and the previous suspension of dividends and S&P Downgrade to P-4(high).

August PrefLetter Released!

August 13th, 2017

The August, 2017, edition of PrefLetter has been released and is now available for purchase as the “Previous edition”. Those who subscribe for a full year receive the “Previous edition” as a bonus.

The August edition contains an evaluation of the CPD Portfolio, as of 2017-7-31.

PrefLetter may now be purchased by all Canadian residents.

Until further notice, the “Previous Edition” will refer to the August, 2017, issue, while the “Next Edition” will be the September, 2017, issue, scheduled to be prepared as of the close September 8 and eMailed to subscribers prior to market-opening on September 11.

PrefLetter is intended for long term investors seeking issues to buy-and-hold. At least one recommendation from each of the major preferred share sectors is included and discussed.

Note: My verbosity has grown by such leaps and bounds that it is no longer possible to deliver PrefLetter as an eMail attachment – it’s just too big for my software! Instead, I have sent passwords – click on the link in your eMail and your copy will download.

Note: The PrefLetter website has a Subscriber Download Feature. If you have not received your copy, try it!

Note: PrefLetter eMails sometimes runs afoul of spam filters. If you have not received your copy within fifteen minutes of a release notice such as this one, please double check your (company’s) spam filtering policy and your spam repository – there are some hints in the post Sympatico Spam Filters out of Control. If it’s not there, contact me and I’ll get you your copy … somehow!

Note: There have been scattered complaints regarding inability to open PrefLetter in Acrobat Reader, despite my practice of including myself on the subscription list and immediately checking the copy received. I have had the occasional difficulty reading US Government documents, which I was able to resolve by downloading and installing the latest version of Adobe Reader. Also, note that so far, all complaints have been from users of Yahoo Mail. Try saving it to disk first, before attempting to open it.

Note: There have been other scattered complaints that double-clicking on the links in the “PrefLetter Download” email results in a message that the password has already been used. I have been able to reproduce this problem in my own eMail software … the problem is double-clicking. What happens is the first click opens the link and the second click finds that the password has already been used and refuses to work properly. So the moral of the story is: Don’t be a dick! Single Click!

Note: Assiduous Reader DG informs me:

In case you have any other Apple users: you need to install a free App from the apple store called “FileApp”. It comes with it’s own tutorial and allows you to download and save a PDF file.

However, Assiduous Reader Adrian informs me in the comments to the January 2015 release:

Some nitpicking for DG:
FileApp costs $1.19 in the Apple Store.

But Adrian2 now advises:

Well, as of now, FileApp is free (again?).