Archive for the ‘Issue Comments’ Category

EMA.PR.A / EMA.PR.B To Be Extended

Friday, July 10th, 2020

Emera Incorporated has announced:

that it does not intend to exercise its right to redeem all or any part of the currently outstanding Cumulative Rate Reset First Preferred Shares, Series A (the “Series A Shares”) or the Cumulative Floating Rate First Preferred Shares, Series B (the “Series B Shares”) of the Company on August 15, 2020. There are currently 3,864,636 Series A Shares and 2,135,364 Series B Shares outstanding.

As a result, subject to certain conditions set out in the prospectus supplement of the Company dated May 26, 2010, to the short form base shelf prospectus of the Company dated May 19, 2010 (collectively, the “Prospectus”), on August 15, 2020 (the “Conversion Date”):

(a) The holders of Series A Shares have the right, at their option:

To retain any or all of their Series A Shares and continue to receive a fixed rate quarterly dividend; or
To convert any or all of their Series A Shares, on a one-for-one basis, into Series B Shares and receive a floating rate quarterly dividend, and
(b) The holders of Series B Shares have the right, at their option:

To retain any or all of their Series B Shares and continue to receive a floating rate quarterly dividend; or
To convert any or all of their Series B Shares, on a one-for-one basis, into Series A Shares and receive a fixed rate quarterly dividend.
The conversion of Series A Shares is subject to the conditions that: (i) if the Company determines, after having taken into account all shares tendered for conversion by holders of Series A Shares that there would remain outstanding on such Conversion Date less than 1,000,000 Series A Shares, such remaining number of Series A Shares will automatically be converted into Series B Shares on a one-for-one basis on such Conversion Date, and (ii) alternatively, if the Company determines that, after conversion, there would remain outstanding on such Conversion Date less than 1,000,000 Series B Shares, then no Series A Shares will be converted into Series B Shares.

The conversion of Series B Shares is subject to the conditions that: (i) if the Company determines, after having taken into account all shares tendered for conversion by holders of Series B Shares that there would remain outstanding on such Conversion Date less than 1,000,000 Series B Shares, such remaining number of Series B Shares will automatically be converted into Series A Shares on a one-for-one basis on such Conversion Date, and (ii) alternatively, if the Company determines that, after conversion, there would be outstanding on such Conversion Date less than 1,000,000 Series A Shares, then no Series B Shares will be converted into Series A Shares.

In either case, Emera will give written notice to that effect to the holders of Series A Shares and the holders of Series B Shares at least seven days prior to the Conversion Date.

The dividend rate applicable for the Series A Shares for the five-year period commencing on August 15, 2020 and ending on (and inclusive of) August 14, 2025, and the dividend rate applicable to the Series B Shares for the 3-month period commencing on August 15, 2020 and ending on (and inclusive of) November 14, 2020, will be determined on July 16, 2020. Notice of such dividend rates shall be provided to the holders of the Series A Shares and the holders of the Series B Shares on that day.

Beneficial owners of Series A Shares or Series B Shares who wish to exercise their conversion right should communicate with their broker or other nominee to obtain instructions for exercising such right during the conversion period, which runs from July 16, 2020 until the deadline of 5:00 p.m. (Toronto Time) on July 31, 2020. Any notices received after this deadline will not be valid. As such, it is recommended that this be done well in advance of the deadline in order to provide their broker or other nominee with adequate time to complete the necessary steps.

Beneficial owners of Series A Shares who do not provide notice or communicate with their broker or other nominee by the deadline will retain their Series A Shares and receive the new annual fixed dividend rate applicable to the Series A Shares, subject to the conditions stated above. Beneficial owners of Series B Shares who do not provide notice or communicate with their broker or other nominee by the deadline will retain their Series B Shares and receive the floating rate quarterly dividend applicable to the Series B Shares, subject to the conditions stated above.

Holders of Series A Shares and Series B Shares will have the opportunity to convert their shares again on August 15, 2025 and every five years thereafter as long as the shares remain outstanding. For more information on the terms of, and risks associated with, an investment in Series A Shares and Series B Shares, please see the Company’s Prospectus, which is available on www.sedar.com.

EMA.PR.A was issued as a FixedReset, 4.40%+184, that commenced trading 2010-6-2 after being announced 2010-5-25. Extension was announced in 2015 and a reset to 2.555% announced. I receommended against conversion, but there was a 36% conversion to EMA.PR.B anyway.

EMA.PR.B is a FloatingReset, Bills+184, that became extant in 2015 via a 36% conversion from EMA.PR.A.

TD.PF.D To Reset At 3.201%

Thursday, July 2nd, 2020

The Toronto-Dominion Bank has announced:

the applicable dividend rates for its Non-Cumulative 5-Year Rate Reset Preferred Shares, Series 7 (Non-Viability Contingent Capital (NVCC)) (the “Series 7 Shares”) and Non-Cumulative Floating Rate Preferred Shares, Series 8 (NVCC) (the “Series 8 Shares”).

With respect to any Series 7 Shares that remain outstanding after July 31, 2020, holders of the Series 7 Shares will be entitled to receive quarterly fixed non-cumulative preferential cash dividends, as and when declared by the Board of Directors of TD, subject to the provisions of the Bank Act (Canada). The dividend rate for the 5-year period from and including July 31, 2020 to but excluding July 31, 2025 will be 3.201%, being equal to the 5-Year Government of Canada bond yield determined as at July 2, 2020 plus 2.79%, as determined in accordance with the terms of the Series 7 Shares.

With respect to any Series 8 Shares that may be issued on July 31, 2020, holders of the Series 8 Shares will be entitled to receive quarterly floating rate non-cumulative preferential cash dividends, calculated on the basis of the actual number of days elapsed in such quarterly period divided by 365, as and when declared by the Board of Directors of TD, subject to the provisions of the Bank Act (Canada). The dividend rate for the floating rate period from and including July 31, 2020 to but excluding October 31, 2020, will be 2.999%, being equal to the 90-day Government of Canada Treasury Bill yield determined as of July 2, 2020 plus 2.79%, as determined in accordance with the terms of the Series 8 Shares.

Beneficial owners of Series 7 Shares who wish to exercise their conversion right should communicate as soon as possible with their broker or other nominee to obtain instructions for exercising such right on or prior to the deadline for exercise, which is 5:00 p.m. (Toronto time) on July 16, 2020.

Inquiries should be directed to TD’s Registrar and Transfer Agent, AST Trust Company (Canada), at 1-800-387-0825 (or in Toronto 416-682-3860).

TD.PF.D is a FixedReset, 3.60%+279, that commenced trading 2015-3-10 after being announced 2015-2-27. Notice of extension was provided on 2020-6-18. The issue is NVCC-compliant, is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

TD.PF.D To Be Extended

Tuesday, June 30th, 2020

The Toronto-Dominion Bank has announced (on June 18):

that it does not intend to exercise its right to redeem all or any part of the currently outstanding 14 million Non-Cumulative 5-Year Rate Reset Preferred Shares, Series 7 (Non-Viability Contingent Capital (NVCC)) (the “Series 7 Shares”) of TD on July 31, 2020. As a result and subject to certain conditions set out in the prospectus supplement dated March 3, 2015 relating to the issuance of the Series 7 Shares, the holders of the Series 7 Shares have the right to convert all or part of their Series 7 Shares, on a one-for-one basis, into Non-Cumulative Floating Rate Preferred Shares, Series 8 (NVCC) (the “Series 8 Shares”) of TD on July 31, 2020. Holders who do not exercise their right to convert their Series 7 Shares into Series 8 Shares on such date will continue to hold their Series 7 Shares.

The foregoing conversion right is subject to the conditions that: (i) if TD determines that there would be less than 1,000,000 Series 8 Shares outstanding after taking into account all shares tendered for conversion on July 31, 2020, then holders of Series 7 Shares will not be entitled to convert their shares into Series 8 Shares, and (ii) alternatively, if TD determines that there would remain outstanding less than 1,000,000 Series 7 Shares after taking into account all shares tendered for conversion on July 31, 2020, then all remaining Series 7 Shares will automatically be converted into Series 8 Shares on a one-for-one basis on July 31, 2020. In either case, TD will give written notice to that effect to holders of Series 7 Shares no later than July 24, 2020.

The dividend rate applicable to the Series 7 Shares for the 5-year period from and including July 31, 2020 to but excluding July 31, 2025, and the dividend rate applicable to the Series 8 Shares for the 3-month period from and including July 31, 2020 to but excluding October 31, 2020, will be determined and announced by way of a press release on July 2, 2020.

Beneficial owners of Series 7 Shares who wish to exercise their conversion right should communicate as soon as possible with their broker or other nominee to obtain instructions for exercising such right during the conversion period, which runs from July 2, 2020 until 5:00 p.m. (Toronto time) on July 16, 2020.

Inquiries should be directed to TD’s Registrar and Transfer Agent, AST Trust Company (Canada), at 1-800-387-0825 (or in Toronto 416-682-3860).

TD.PF.D is a FixedReset, 3.60%+279, that commenced trading 2015-3-10 after being announced 2015-2-27. It is NVCC-compliant and is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

CM.PR.Q To Reset To 3.143%

Tuesday, June 30th, 2020

Canadian Imperial Bank of Commerce has announced:

the dividend rates applicable to its Non-cumulative Rate Reset Class A Preferred Shares Series 43 (Non-Viability Contingent Capital (NVCC)) (the “Series 43 Shares”) and Non-cumulative Floating Rate Class A Preferred Shares Series 44 (Non-Viability Contingent Capital (NVCC)) (the “Series 44 Shares”).

The fixed dividend rate applicable to the Series 43 Shares, should any remain outstanding after July 31, 2020, for the five-year period from and including July 31, 2020 to but excluding July 31, 2025 is 3.143%, payable quarterly as and when declared by the Board of Directors of CIBC.

The floating dividend rate applicable to the Series 44 Shares, should any be issued, for the three-month period from and including July 31, 2020 to but excluding October 31, 2020 is 3.003%, payable for the period as defined as and when declared by the Board of Directors of CIBC. CIBC has designated the Series 44 Shares as eligible to participate in the CIBC Shareholder Investment Plan.

Beneficial owners of Series 43 Shares who wish to exercise their conversion right should instruct their broker or other nominee to exercise such right during the conversion period, which runs from July 1, 2020 until 5:00 p.m. (Eastern Daylight Time) on July 16, 2020. Any notices received after this deadline will not be valid.

CM.PR.Q is a FixedReset, 3.60%+279, that commenced trading 2015-3-11 after being announced 2015-2-26. The issue is tracked by HIMIPref™ and is assigned to the FixedResets (Discount) subindex.

TRP.PR.B / TRP.PR.H : 10% Net Conversion To FixedReset

Tuesday, June 30th, 2020

TC Energy Corporation has announced (on June 22):

that 401,590 of its 8,533,405 fixed rate Cumulative Redeemable First Preferred Shares, Series 3 (Series 3 Shares) have been elected for conversion on June 30, 2020, on a one-for-one basis, into floating rate Cumulative Redeemable First Preferred Shares, Series 4 (Series 4 Shares); and 1,865,362 of its 5,466,595 Series 4 Shares have been elected for conversion, on a one-for-one basis, into Series 3 Shares. As a result of the conversions, TC Energy will have 9,997,177 Series 3 Shares and 4,002,823 Series 4 Shares issued and outstanding. The Series 3 Shares and Series 4 Shares will continue to be listed on the Toronto Stock Exchange (TSX) under the symbols TRP.PR.B and TRP.PR.H, respectively.

The Series 3 Shares will pay on a quarterly basis for the five-year period beginning on June 30, 2020, as and when declared by the Board of Directors of TC Energy, a fixed dividend at an annualized rate of 1.694%.

The Series 4 Shares will pay a floating rate quarterly dividend for the five-year period beginning on June 30, 2020, as and when declared by the Board of Directors of TC Energy. The dividend rate for the Series 4 Shares for the first quarterly floating rate period commencing June 30, 2020 to but excluding September 30, 2020 is 1.535% and will be reset every quarter.

Holders of Series 3 Shares and Series 4 Shares will have the opportunity to convert their shares again on June 30, 2025 and every five years thereafter as long as the shares remain outstanding. For more information on the terms of, and risks associated with an investment in the Series 3 Shares and the Series 4 Shares, please see the prospectus supplement dated March 4, 2010 which is available on sedar.com or on our website.

TRP.PR.B is a FixedReset 4.00%+128 that commenced trading 2010-3-11 after being announced 2010-3-4. It reset to 2.152% effective 2015-6-30, which triggered a 39% conversion to the FloatingReset TRP.PR.H despite my recommendation not to convert. The issue will reset to 1.694% effective 2020-6-30.

TRP.PR.H is a FloatingReset, Bills+128, that arose from a 39% conversion from the FixedReset TRP.PR.B in 2015.

BAM.PF.G : No Conversion To FloatingReset

Tuesday, June 30th, 2020

Brookfield Asset Management Inc. has announced (on June 22):

that after having taken into account all election notices received by the June 15, 2020 deadline for the conversion of its Cumulative Class A Preference Shares, Series 42 (the “Series 42 Shares”) (TSX: BAM.PF.G) into Cumulative Class A Preference Shares, Series 43 (the “Series 43 Shares”), there were 132,682 Series 42 Shares tendered for conversion, which is less than the one million shares required to give effect to conversions into Series 43 Shares. Accordingly, there will be no conversion of Series 42 Shares into Series 43 Shares, and holders of Series 42 Shares will retain their Series 42 Shares.

BAM.PF.G is a FixedReset, 4.50%+284, that commenced trading 2014-10-8 after being announced 2014-10-1. The issue will reset to 3.254% effective 2020-7-1. It is tracked by HIMIPref™ and is assigned to the FixedResets (Discount) subindex.

SLF.PR.G / SLF.PR.J : 9% Net Conversion to FixedReset

Tuesday, June 30th, 2020

Sun Life Financial Inc. has announced (on June 19):

that 116,341 of its 5,192,686 Class A Non-cumulative Rate Reset Preferred Shares Series 8R (the “Series 8R Shares”) have been elected for conversion on June 30, 2020, on a one-for-one basis, into Class A Non-cumulative Floating Rate Preferred Shares Series 9QR (the “Series 9QR Shares”), and 1,140,986 of its 6,007,314 Series 9QR Shares have been elected for conversion on June 30, 2020 on a one-for-one basis, into Series 8R Shares. Consequently, on June 30, 2020, Sun Life will have 6,217,331 Series 8R Shares and 4,982,669 Series 9QR Shares issued and outstanding. The Series 8R Shares and Series 9QR Shares will be listed on the Toronto Stock Exchange under the symbols SLF.PR.G and SLF.PR.J, respectively.

Subject to regulatory approval, Sun Life may redeem all or any part of the outstanding Series 8R Shares, at Sun Life’s option, by the payment of an amount in cash for each share so redeemed of $25.00, together with all declared and unpaid dividends to the date fixed for redemption, on June 30, 2025 and on the 30th of June in every fifth year thereafter. Subject to regulatory approval, Sun Life may redeem all or any part of the then outstanding Series 9QR Shares, at Sun Life’s option, by the payment of an amount in cash for each share so redeemed of (i) $25.00, together with all declared and unpaid dividends to the date fixed for redemption in the case of redemptions on June 30, 2025 and on June 30 every five years thereafter, or (ii) $25.50, together with all declared and unpaid dividends to the date fixed for redemption in the case of redemptions on any other date.

SLF.PR.G was issued as a FixedReset, 4.35%+141, announced 2010-5-13 and commenced trading 2010-5-25. It reset to 2.275% effective 2015-6-30, which triggered a 50% conversion to the FloatingReset SLF.PR.J. I recommended against conversion. SLF.PR.G resets to 1.825% effective 2020-6-30. The issue is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

SLF.PR.J is a FloatingReset, Bills+141, that arose from a 50% conversion from the FixedReset SLF.PR.G. It commenced trading 2015-6-30.

DBRS Downgrades Five SplitShare Preferreds

Thursday, June 25th, 2020

DBRS has announced that it:

downgraded five ratings of preferred shares issued by various split-share companies as follows:

— the Preferred Shares issued by Dividend Growth Split Corp. to Pfd-4 (high) from Pfd-3
— the Preferred Shares issued by Brompton Lifeco Split Corp. to Pfd-4 (low) from Pfd-3 (low)
— the Preferred Shares issued by Life & Banc Split Corp to Pfd-3 (low) from Pfd-3
— the Preferred Shares issued by Prime Dividend Corp to Pfd-3 from Pfd-3 (high)
— the Preferred Shares issued by S Split Corp. to Pfd-4 from Pfd-3 (collectively, the Preferred Shares)

Each of these split-share companies invests in a portfolio of securities (the Portfolio) funded by issuing two classes of shares: dividend-yielding preferred shares or securities and capital shares or units (the Capital Shares). In such structure, preferred shares normally benefit from downside protection provided by the net asset value (NAV) of the Capital Shares.

On March 24, 2020, DBRS Morningstar placed the Preferred Shares Under Review with Negative Implications. Each of the Preferred Shares has experienced a considerable reduction in downside protection since February 2020 as a result of the rapid decline in the net asset value (NAV) of the respective portfolios in response to the stock market sell-off, which was triggered by the worldwide spread of Coronavirus Disease (COVID-19) and various geopolitical events.

DBRS Morningstar downgraded the ratings of the Preferred Shares based on longer-term trends being established for the NAVs of the affected split-share companies. Although the downside protection has experienced some recovery in all five Portfolios in the past three months, its current levels remain below the required levels for the corresponding ratings of the Preferred Shares, which they had had before they were placed Under Review with Negative Implications. Ratings assigned are also dependent on the credit quality and management of the Portfolios. For many of the split-share companies listed above, distributions to holders of the Capital Shares are now suspended due to the failure to pass the asset-coverage tests. This feature ensures greater excess income for the Company and decreases the reliance on other income-generating methods, such as option writing, when downside protection has been significantly reduced.

CORONAVIRUS-RELATED ANALYTICAL CONSIDERATIONS
Global macroeconomic forecasts have shifted dramatically amid the rapid spread of the coronavirus and associated responses from governments, corporations, and households. In the context of this highly uncertain environment, DBRS Morningstar initially published macroeconomic scenarios on April 16, 2020. The scenarios were updated on June 1, 2020, and are reflecting the updated scenarios in DBRS Morningstar’s rating analysis. The updated scenarios can be found at https://www.dbrsmorningstar.com/document/361867.

To summarize in tabular form, the downgrades are as follows:

Ticker Old Rating New Rating Recent
Asset
Coverage
DGS.PR.A Pfd-3 Pfd-4(high) 1.3-:1
LCS.PR.A Pfd-3(low) Pfd-4(low) 1.2-:1
LBS.PR.A Pfd-3 Pfd-3(low) 1.4-:1
PDV.PR.A Pfd-3(high) Pfd-3 1.5-:1
SBN.PR.A Pfd-3 Pfd-4 1.2+:1

The mass review was announced by DBRS in March, 2020.

New Issue : Big Banc Split Corp., 6%, 3-Year

Friday, June 19th, 2020

Assiduous Reader PD writes in and informs me of a new issue SplitShare, Big Banc Split Corp., 6%, 3-Year:

Big Banc Split Corp. (the “Company”) is a mutual fund corporation incorporated under the laws of the Province of Ontario. The Company proposes to offer preferred shares (“Preferred Shares”) and class A shares (“Class A Shares”) at a price of $10.00 per Preferred Share and $10.00 per Class A Share (the “Offering”). Preferred Shares and Class A Shares will be issued only on the basis that an equal number of Preferred Shares and Class A Shares will be outstanding at all material times.

The investment objectives for the Preferred Shares are to provide their holders with fixed cumulative preferential monthly cash distributions in the amount of $0.05 per Preferred Share ($0.60 per annum or 6.0% per annum on the issue price of $10.00 per Preferred Share) until November 30, 2023 (the “Maturity Date”) and to return the original issue price of $10.00 to holders on the Maturity Date. See “Investment Objectives”.

The Company will invest on an approximately equally-weighted basis in a portfolio (the “Portfolio”) of equity securities (the “Portfolio Shares”) of the following publicly traded Canadian banks: Bank of Montreal; Canadian Imperial Bank of Commerce; National Bank of Canada; Royal Bank of Canada; The Bank of Nova Scotia; and The Toronto-Dominion Bank. In order to seek to generate additional returns and enhance the Portfolio’s income, the Manager may write covered call options and cash covered put options in respect of some or all of the Portfolio Shares held in the Portfolio. See “Investment Objectives” and “Investment Strategies”.

The Preferred Shares will not be rated by any rating organization. See “Description of the Securities”. Based on the initial expected net asset value per unit (consisting of one Preferred Share and one Class A Share (each, a “Unit”)), after taking into account offering expenses, the asset coverage ratio based on the Preferred Share original issue price of $10.00 is 190% and the Downside Protection is 47.5%. “Downside Protection” refers to the percentage that the Portfolio would have to decline in value before holders of the Preferred Shares would be in a first-dollar loss position.

“Maturity Date” means November 30, 2023, subject to extension for successive terms of up to 3 years as determined by the Company’s Board of Directors.

The policy of the Board of Directors of the Company will initially be to pay monthly noncumulative distributions to the holders of Class A Shares in the amount of $0.067 per Class A Share. Such distributions will be paid on or before the 15th day of the month following the month in respect of which the distribution is declared payable. No distributions will be paid on the Class A Shares (i) if the distributions payable on the Preferred Shares are in arrears, or (ii) if after paying a cash distribution, the NAV per Unit would be less than $15.00.

Holders of Preferred Shares whose Preferred Shares are surrendered for [monthly] retraction will be entitled to receive a retraction price per Preferred Share equal to the lesser of (i) 95% of the NAV per Unit determined as of such Retraction Date, less the cost to the Company of the purchase of a Class A Share for cancellation; and (ii) $10.00 (the “Preferred Share Retraction Price”).

On a Maturity Date, a holder of Preferred Shares may retract such Preferred Shares. The Company will provide at least 60 days’ notice by way of a press release to holders of Preferred Shares of such right. The Preferred Shares must be surrendered for retraction by 5:00 p.m. (Toronto time) on the last Business Day of the month prior to the Maturity Date or subsequent maturity date, as applicable. The redemption price payable by the Company for a Preferred Share pursuant to the non-concurrent retraction right will be equal to the lesser of (i) $10.00 plus any accrued and unpaid distributions thereon, and (ii) the Net Asset Value of the Company on the Maturity Date divided by the total number of Preferred Shares then outstanding.

As these securities will not be rated, they will not be tracked by HIMIPref™. As I am always quick to explain, this is not because I worship the Credit Rating Agencies or because I can’t do it myself, but because nobody really cares what Hymas Investment Management Inc. thinks of an issue’s credit quality. Something from the agencies, though, gets the attention of management, directors and thousands of salesmen pretty quickly.

It’s nice to see some competition for Brompton Split Banc Corp., SBC and Canadian Banc Corp, BK.

HSE.PR.G : No Conversion To FloatingReset

Wednesday, June 17th, 2020

Husky Energy has announced:

that 212,461 Cumulative Redeemable Preferred Shares, Series 7 (Series 7 Shares) were tendered for conversion, which is less than the one million shares required to give effect to conversion into Cumulative Redeemable Preferred Shares, Series 8 (Series 8 Shares). As a result, none of the Series 7 Shares will be converted into Series 8 Shares on June 30, 2020.

HSE.PR.G is a FixedReset, 4.60%+352, that commenced trading 2015-6-17 after being announced 2015-6-9. The issue will reset to 3.935% effective 2020-6-30. It is tracked by HIMIPref™ and is assigned to the FixedReset subindex.