Archive for the ‘Issue Comments’ Category

BNS.PR.I Firm on Modest Volume

Friday, October 12th, 2018

The Bank of Nova Scotia has announced:

that it has completed the domestic public offering of Non-cumulative 5-Year Rate Reset Preferred Shares Series 40 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 40”).

Scotiabank sold 12 million Preferred Shares Series 40 at a price of $25.00 per share and holders will be entitled to receive a non-cumulative quarterly fixed dividend for the initial period ending January 26, 2024 yielding 4.85% per annum, as and when declared by the Board of Directors of Scotiabank. The gross proceeds of the offering were $300 million.

The offering was made through a syndicate of underwriters led by Scotia Capital Inc. The Preferred Shares Series 40 commenced trading on the Toronto Stock Exchange today under the symbol BNS.PR.I.

On January 27, 2024 and on January 27 every five years thereafter, Scotiabank may, at its option, subject to regulatory approval, redeem all or any number of the then outstanding Preferred Shares Series 40 at a redemption price of $25 per share. Thereafter, the dividend rate will reset every five years at a rate equal to 2.43% over the 5-year Government of Canada bond yield. Holders of Preferred Shares Series 40 will, subject to certain conditions, have the right to convert all or any part of their shares to Non-cumulative Floating Rate Preferred Shares Series 41 (Non-Viability Contingent Capital (NVCC)) (the “Preferred Shares Series 41”) of Scotiabank on January 27, 2024 and on January 27 every five years thereafter.

Holders of the Preferred Shares Series 41 will be entitled to receive a non-cumulative quarterly floating dividend at a rate equal to the 3-month Government of Canada Treasury Bill yield plus 2.43%, as and when declared by the Board of Directors of Scotiabank. Holders of Preferred Shares Series 41 will, subject to certain conditions, have the right to convert all or any part of their shares to Preferred Shares Series 40 on January 27, 2029 and on January 27 every five years thereafter.

BNS.PR.I is a FixedReset, 4.85%+243, NVCC, issue that was announced 2018-10-2. It will be tracked by HIMIPref™ and has been assigned to the FixedReset-Discount sub-index.

The issue traded 644,420 shares today in a range of 24.90-97 before closing at 24.93-97. Vital statistics are:

BNS.PR.I FixedReset Disc YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-10-12
Maturity Price : 23.12
Evaluated at bid price : 24.93
Bid-YTW : 4.76 %

The new issue is quite expensive according to Implied Volatility Analysis:

impvol_bns_181012
Click for Big

According to this analysis, the fair value of the new issue on October 12 is 23.05, down from the October 2 fair value of 23.43. However, it should be noted that the analysis is forced to do some major extrapolation, as the only other BNS FixedReset NVCC-compliant issues are BNS.PR.E, BNS.PR.G and BNS.PR.H, all of which have Issue Reset Spreads in excess of 400bp. On the other hand, the issue seems well aligned with the NVCC non-compliant issues, whereas it should be well above the regression line they form.

The ludicrously high figure of Implied Volatility is something I take to mean that the underlying assumption of the Black-Scholes model, that of no directionality of prices, is not accepted by the market; the market seems to be taking the view that since things seem rosy now, they will always be rosy and everything will trade near par in the future.

I balk at ascribing a 100% probability to the ‘all issues will be called, or at least exhibit price stability’ hypothesis. There may still be a few old geezers amongst the Assiduous Readers of this blog who can still (faintly) remember the Great Bear Market of 2014-16, in which quite a few similar assumptions made earlier turned out to be slightly inaccurate. The extra cushion implied by an Issue Reset Spread that is well over the market spread is worth something, even if nothing gets called. Or, to put it another way, one can buy a whole lot of downside protection for very little extra money, relative to this issue.

CCS : Outlook Stable, says S&P

Friday, October 12th, 2018

Standard & Poor’s has announced:

  • •The Co-operators’ P/C operations have lagged the performance of the broader P/C sector and improvement in profitability and scale of the life operations have lagged original expectations.
  • •We are revising our outlook on Co-operators and its core operating subsidiaries to stable from positive, and affirming our ratings.
  • •The stable outlook reflects our expectation that Co-operators will maintain at least very strong capitalization and strong competitive position despite challenges expanding its life insurance operations and P/C underwriting performance.

… S&P Global Ratings said today it revised its outlook on Co-operators Financial Services Ltd. (Co-operators) and
its core operating life and property/casualty (P/C) insurance subsidiaries to stable from positive. We also affirmed our ‘BBB’ long-term issuer credit rating, senior unsecured debt rating, and preferred stock rating on Co-operators, and our ‘A-‘ financial strength rating on Co-operators’ core operating life and P/C insurance subsidiaries.

Co-operator General is typically the earnings engine for the group. However, given the company’s accelerated growth in a challenging P/C market, specifically Ontario auto, we expect underwriting performance for the P/C operations to lag the Canadian P/C market. Additionally, more frequent weather-related losses continue to strain the bottom line. For the first half of 2018, Co-operators General had a combined ratio of 107.7%, which was approximately 6 points worse than the 101.7% combined ratio the industry posted. This underperformance follows up 2017 results, when the company posted a combined ratio of 102.4% compared to the industry’s 96.4%. We expect underwriting performance to improve from year-to-date results, but lag the overall industry as Co-operators works through earning rate increases for both property and auto lines of business. The company will likely gain market share given publicly stated actions from competitors to reduce share in Ontario auto, which can improve their market position assuming they ultimately reach rate adequacy and improve the underwriting performance with minimal movement in retentions.

The outlook is stable. We expect profitability for the group to be driven by the P/C group, albeit at lower levels because of growth in difficult markets including Ontario and Alberta auto, and the frequency of weather-related
losses.

The affected issue is CCS.PR.C

TRI.PR.B Downgraded to P-3(high) by S&P

Friday, October 5th, 2018

Standard & Poor’s has announced:

  • •Toronto-based information services company Thomson Reuters Corp. completed the sale of its Financial & Risk (F&R) business, selling a controlling 55% equity interest to Blackstone Group alongside affiliates of Canada Pension Plan and GIC).
  • •We view the divesture of the F&R business, which accounted for more than half of Thomson Reuters’ consolidated revenue and EBITDA in 2017, as a loss of the scale and diversification benefits that we previously factored into our rating.
  • •We are lowering our issuer credit rating on Thomson Reuters and our senior unsecured issue-level ratings by one notch to ‘BBB’ from ‘BBB+’. We affirmed our ‘A-2’ short-term commercial paper rating.
  • •The stable outlook reflects our expectation for modest organic revenue growth in the low- to mid-single-digit percentage range, EBITDA margins steadily rise to the mid-20% over the next two years as the company reduces costs and improves its operating efficiency, and that the company will maintain adjusted debt to EBITDA leverage below 3x.

NEW YORK (S&P Global Ratings) Oct. 4, 2018–S&P Global Ratings today lowered its long-term issuer credit rating on Toronto-based information services company Thomson Reuters Corp. to ‘BBB’ from ‘BBB+’ and affirmed its ‘A-2’ short-term issuer credit rating. The rating outlook is stable. We also lowered the issue-level ratings on the company’s senior unsecured debt to ‘BBB’ from ‘BBB+’. We removed the ratings from CreditWatch negative, where we placed them n Jan. 31, 2018, following the company’s announcement of the sale of majority stake in its F&R business.

We also lowered our Canadian scale preferred share rating to ‘P-3(High)’ from ‘P-2(Low)’, lowered our preferred share issue rating to ‘BB+’ from ‘BBB-‘ and affirmed our ‘A-2′ short-term rating on the company’s U.S. commercial paper facility.

The downgrade reflects the divesture of the F&R business, which accounted for more than half of Thomson Reuters’ consolidated revenue and EBITDA in 2017. As a result of this sale, we believe the company is losing the scale and diversification benefits that we previously factored into our rating.

As reported on PrefBlog, S&P placed TRI on Watch-Negative in January, 2018. DBRS downgraded the issue to Pfd-3(high) in October 2013.

The sole affected issue is TRI.PR.B

DBRS Confirms EFN after Strategic Plan Announced

Monday, October 1st, 2018

Element Fleet Management Corp. has announced:

a customer-centric plan to meaningfully improve financial performance, strengthen and de-risk the Company’s balance sheet, and position the business for growth.

The plan includes:
  • •A series of concrete actions to improve the customer experience and generate an estimated $150 million in run-rate pre-tax operating income improvements in the fleet management business by the end of 2020;
  • •A $150 million investment in the business to achieve those improvements, which will be funded in part by capital retained after a reduction in the Company’s quarterly common share dividend from $0.075 to $0.045, and the introduction of a dividend reinvestment plan;
  • •An agreement, subject to the satisfaction of certain conditions, to purchase the interests in the 19th Capital joint venture that Element does not already own for nominal consideration, and Element plans to undertake an orderly run off of 19thCapital’s assets over the next 36 months. In conjunction with this initiative, Element will recognize an after-tax charge of approximately $360 million in the third quarter reflecting a write down of the carrying value of its remaining investment in 19th Capital;
  • •Strengthening the Company’s investment-grade balance sheet through a $300 million offering of common shares via a bought deal transaction; and
  • •A clear accountability plan, including a Transformation Management Office run by a leading global consulting firm that will bring focus, support and accountability for the duration of the program, as well as regular reporting to track our performance

DBRS has announced that it:

has confirmed the ratings for Element Fleet Management Corp. (EFN or the Company), including the Company’s Long-Term Issuer Rating of BBB (high) and Short-Term Issuer Rating of R-2 (high). The trend on all ratings is Stable. The Intrinsic Assessment (IA) for the Company is BBB (high), while its Support Assessment is SA3. As a result, EFN’s final ratings are equalized with its IA.

KEY RATING CONSIDERATIONS
The ratings consider Element’s action plan following an in-depth and broad review of three distinct workstreams completed by the new executive management team and the Board of Directors that should contribute to better operating performance going forward. Nonetheless, the plan does have execution risks, including the realization of synergies and efficiencies, as well as the successful wind down of 19th Capital without additional losses or costs to Element. The Company’s position as the market leader in North American commercial fleet as well as leading positions in Australia and New Zealand, its low risk balance sheet and well-aligned funding profile support the ratings. The ratings also consider the Company’s reliance on secured forms of wholesale funding, returns that are solid, but lag the peer group at the next rating level and elevated leverage.

The Stable trend reflects DBRS’s expectation that the Company will continue to produce solid earnings from its core fleet business as it executes the strategic plan, while maintaining strong asset performance. The Company’s ample available liquidity and good access to the capital markets are considered in the trend. The Stable trend also considers DBRS’s view that the long-term fundamentals for the commercial fleet industry will remain favorable supported by the continuing trend of large corporates outsourcing the management of their commercial fleets to save costs. Moreover, the increasing volume of data produced by vehicles that may be analyzed to increase driver productivity and the operating efficiency of the fleets requires scalable IT platforms, such as that offered by EFN, further underpinning demand for commercial fleet services.

Affected issues are EFN.PR.A , EFN.PR.C , EFN.PR.E , EFN.PR.G and EFN.PR.I .

HSE on Credit Watch Negative by S&P

Monday, October 1st, 2018

Husky Energy Inc.has announced:

a proposal to acquire all of the outstanding shares of MEG Energy Corp. (TSX:MEG) (“MEG”) for implied total equity consideration of approximately $3.3 billion. This proposal values MEG at an implied total enterprise value of $6.4 billion, including the assumption of approximately $3.1 billion of net debt.

This caused immediate reaction by Standard & Poor’s:

  • •We are placing our ratings on Husky Energy Inc. on CreditWatch with negative implications, following its announced unsolicited bid to acquire oil sands bitumen producer, MEG Energy Corp.
  • •We are also placing our ‘BBB-‘ global scale and ‘P-2(Low)’ Canada scale preferred share ratings on CreditWatch with negative implications, as we would lower them to ‘BB+’ and ‘P-3(High)’, respectively, concurrent with a downgrade on the company to ‘BBB’.
  • •We are assuming Husky’s major shareholder will retain its majority ownership in the company, so we expect the one-notch uplift to its rating, which is supported by this ownership, should remain in effect.
  • •The negative CreditWatch reflects the potential deterioration of Husky’s cash flow and leverage metrics, with the addition of MEG’s existing C$3.6 billion of debt (at June 30, 2018), and the resulting deterioration of the company’s financial risk profile, which could lead to a downgrade.


The CreditWatch is based on the potential deterioration of Husky’s financial risk profile, if the company acquires MEG. The C$3.6 billion of MEG’s debt being assumed will materially weaken Husky’s pro forma cash flow and leverage metrics, and we believe the company’s financial risk profile might deteriorate by one category from our current weighted-average estimate for the 2018-2020 forecast period. At this time, we believe Husky’s major shareholder should retain its ownership position in the company, which would support the continued one-notch uplift to the credit rating. As a result, we believe the rating downside should be limited to one notch.

We expect to resolve the CreditWatch placement when the transaction closes.
This should occur in early 2019.

S&P currently rates the preferreds as P-2(low).

DBRS commented:

Nevertheless, DBRS notes that if Husky’s offer is successful in its current form, the addition of MEG’s assets would be mildly positive for Husky’s business risk profile. The inclusion of MEG’s assets (1) adds to Husky’s size, (2) improves the Company’s proven reserve life index, (3) complements Husky’s other thermal oil developments in Western Canada and (4) enhances Husky’s heavy oil integration plans. Tempering the improvement in the business risk profile is a higher level of asset concentration in Western Canada and a higher proportion of thermal oil in the Company’s production mix.

DBRS notes that Husky’s credit metrics (assuming Husky’s offer is successful in its current form) are modestly negatively affected initially due to the sizable amount of MEG debt that the Company would incur. On a pro forma basis (last 12 months ended June 30, 2018), Husky’s lease-adjusted debt-to-cash flow ratio rises from approximately 1.6 times (x) to 2.3x (outside the “A” range). However, Husky has noted that approximately $200 million in synergies could be realized annually from the acquisition of the MEG assets. Also, the combined entity is expected to generate material free cash flow (cash flow after capital spending and dividends) that can be deployed to reducing net debt and financial leverage. The Company anticipates a net debt-to-cash flow ratio of the combined entity (based on current strip pricing in 2019 for West Texas Intermediate oil of USD 70.50/bbl and a heavy light oil differential in Western Canada of USD 26.26/bbl) to be approximately 1.0x in 2019.

DBRS confirmed the preferreds at Pfd-2(low) on 2017-11-14.

Affected issues are HSE.PR.A, HSE.PR.B, HSE.PR.C, HSE.PR.E and HSE.PR.G.

DGS.PR.A To Extend Term

Friday, September 28th, 2018

Brompton Group has announced:

As a result of strong long-term performance, Dividend Growth Split Corp. (the “Fund”) is pleased to announce that the board of directors has approved an extension of the maturity date of the Class A and Preferred shares of the Company. The current maturity date of November 28, 2019 will be extended for an additional period of three to five years. The new term and the proposed rate for the preferred share dividend for the new term will be announced at least 60 days prior to the current November 28, 2019 maturity date. The preferred share dividend rate for the extended term will be based on market yields for preferred shares with similar terms at that time.

The extension of the term of the Fund is not expected to be a taxable event and should enable shareholders to defer potential capital gains tax liability that would have otherwise been realized on the redemption of the Class A shares or Preferred Shares at the end of the term until such time as such shares are disposed of by shareholders.
Since inception in December 2007 to August 31, 2018, the Class A share has delivered a 7.4%(1) per annum return, which outperformed the S&P/TSX Composite Index by 2.7% per annum. Since inception to August 31, 2018, Class A shareholders have received cash distributions of $12.39. Class A shareholders also have the option to reinvest their cash distributions in a dividend reinvestment plan which is commission free to participants. Class A shareholders can enroll in the DRIP program by contacting their investment advisor.

The term extension offers Preferred shareholders the opportunity to enjoy preferential cash dividends until the end of the extended term. Since inception to August 31, 2018, the Preferred share has delivered a 5.4% (1) per annum return.

The Fund invests, on an approximately equally-weighted basis, in a portfolio consisting primarily of equity securities of Canadian dividend growth companies. In addition, DGS may hold up to 20% of the total assets of the portfolio in global dividend growth companies for diversification and potentially enhanced return potential.

DGS.PR.A approved a term extension in 2011 which became official in 2013 and took effect in 2014 (these guys like to plan ahead!) with the dividend rate unchanged at 5.25%. The manager’s mandate expanded slightly in August, 2018.

DGS.PR.A is tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

FTU.PR.B To Extend Term and Boost Dividend

Thursday, September 27th, 2018

Quadravest has announced:

US Financial 15 Split Corp. (the “Company”) is pleased to announce it has extended the termination date of the Company a further six year period from December 1, 2018 to December 1, 2024.

In connection with the extension, the Company will also amend the dividend entitlement of the FTU.PR.B Preferred Shares (“Preferred Shares”) effective December 1, 2018, to pay a cumulative preferential monthly dividend at an annual rate equivalent to 10.00% based on the net asset value per unit as at the end of the preceding month to a maximum of $0.0833 per Preferred Share per month (10.00% of $10.00 original issue price). This represents an increase of 4.75% in the rate from the current annual policy of 5.25% of the preceding month end net asset value.

The dividend policy for the FTU Class A Shares (“Class A Shares”) will remain unchanged.

In connection with the extension, the Company will offer a Special Retraction Right which will allow existing shareholders to tender one or both classes of Shares and receive a retraction price based on the November 30, 2018 net asset value per unit.

Since inception of the Company, Class A Shares have received a total of $3.70 per share and Preferred Shares have received a total of $5.58 per share, for a combined total of $9.28.

US Financial 15 invests in a portfolio consisting of 15 U.S. financial services companies as follows: American Express, Bank of America, Bank of New York Mellon Corp., Citigroup, CME Group Inc., Fifth Third Bancorp, The Goldman Sachs Group, J.P. Morgan Chase & Co., Morgan Stanley, PNC Financial Services Group Inc., Regions Financial Corp., State Street Corp., SunTrust Banks, U.S. Bancorp, and Wells Fargo.

FTU.PR.B is currently backed by a NAVPU of 9.14 as of 2018-09-14 against a par value of 10.00 – the fund is underwater! The fund has total assets of 26-million as of 2018-08-31, all of which is due to the preferred shareholders. The fund got whacked in the Credit Crunch – there has not been a distribution to Capital Unitholders since May, 2008.

According to the 2018 Annual Information Form:

In the event that the Termination Date is extended in any Extension Year, each holder of Preferred Shares or Class A Shares shall have the right to retract such Preferred Shares or Class A Shares effective December 1 of such Extension Year (the “Recurring Special Retraction Right”). The price payable per Preferred Share so retracted shall be equal to (i) the sum of (A) the lesser of (x) $10.00 and (y) the net asset value of the Company calculated on November 30 of such Extension Year, divided by the number of Preferred Shares then outstanding, plus (B) an amount equal to the accrued and unpaid dividends on each Preferred Share to but excluding November 30 of such Extension Year, plus (ii) all Dividends Owing thereon to but excluding November 30 of such Extension Year. The price payable per Class A Share so retracted shall be equal to the greater of (i) the net asset value per Unit calculated on November 30 of such Extension Year less $10.00, and (ii) zero. Holders of Preferred Shares or Class A Shares wishing to take advantage of the Recurring Special Retraction Right must surrender their Preferred Shares or Class A Shares for retraction no later than the close of business on November 1 of such Extension Year (or, if November 1 of such year is not a business day, on the immediately preceding business day). Payment of the retraction price per Preferred Share or Class A Share owing in respect of the exercise of the Recurring Special Retraction Right will be made on or before December 15 of such Extension Year (or, if December 15 of such year is not a business day, on the immediately succeeding business day).

November 1 is a Thursday this year, so the deadline to notify the company of a desire to retract is November 1 (brokerages will set their internal deadlines a few days earlier).

This is important, because it is virtually certain that I will recommend retraction.

In the previous extension, preferred shareholders got warrantsall of the 2014 warrants were exercised, as were many of the 2013 warrants (see SEDAR and search for “US Financial 15 Split Corp. Apr 4 2013 10:25:30 ET News release – English PDF 18 K” and then write your friendly neighborhood regulator and ask why I can’t link this public document directly).

The warrants were not enough to prevent any intelligent person from exercising the Special Retraction Right, but this is the preferred share market.

Look. The NAVPU is below the preferred share par value. This means that every dime, now or in the future, should accrue to the preferred shareholders. But in the event of a miraculous upsurge in the US market, it doesn’t and it won’t. The Capital Units will get all the money over the preferred share par value of $10.00 on liquidation. If things are miraculous enough, they might even get interim distributions. Why? What are they paying preferred shareholders for this privilege? Nuthin’. They will not share any future losses, because they’ve lost everything already, but they may share future profits. Why give them this sweet deal for free? Preferred shareholders will be far better off if they retract for cash and reinvest the proceeds in a US portfolio. As it stands, they are now invested in an expensive mutual fund (MER = 1.53% according to the 18H1 Semi-annual report) with cruddy returns (-1.09% since inception, vs. +3.62% for the S&P 500 Financial Index, according to the 2017 Annual Report).

Why? Why would anybody in his right mind hold this issue, when you can get the full NAVPU with a special retraction?

It closed at $8.85 today, a slight (just over 3%) discount to the September 14 NAVPU of 9.14, so after hedging costs there’s hardly any incentive to try to arbitrage the difference.

So the 10% coupon they’re offering is best characterized as flim-flam. All the money should belong, and can belong, to the preferred shareholders. Retract!

BK.PR.A To Extend Term and Boost Dividend

Thursday, September 27th, 2018

Quadravest has announced:

Canadian Banc Corp. (the “Company’) is pleased to announce it has extended the termination date of the Company a further five year period from December 1, 2018 to December 1, 2023.

In connection with the extension, the Company will also amend the dividend entitlement of the BK.PR.A Preferred Shares (“Preferred Shares”) effective December 1, 2018, to pay a cumulative preferential floating rate monthly dividend at an annual rate equivalent to the prevailing Canadian Prime Rate plus 1.5% (previously 0.75%). The minimum rate per annum of which dividends will be paid on the Preferred Shares remains at 5% and the maximum rate will increase from 7% to 8%. Assuming no change in the current Prime Rate of 3.7%, the dividends paid on the Preferred Shares would increase from the current rate of 5.0% to 5.2% per annum on their $10 redemption value. The BK Class A Shares (“Class A Shares”) will continue to receive their targeted monthly payments currently set at an annualized rate of 10%, based on the volume weighted average market price of the Class A Shares over the last 3 trading days of the preceding month.

In connection with the term extension, the Company will offer a Special Retraction Right which will allow existing shareholders to tender one or both classes of Shares and receive a retraction price based on the November 30, 2018 net asset value per unit.

Since inception of the Company, the Class A Shares have received a total of $14.05 per share and the Preferred Shares have received a total of $6.98 per share, for a combined total of $21.03.

The Company invests in a portfolio of six publicly traded Canadian Banks as follows:

Bank of Montreal Canadian Imperial Bank of Commerce Royal Bank of Canada
The Bank of Nova Scotia National Bank of Canada The Toronto-Dominion Bank

BK.PR.A is currently backed by a NAVPU of 22.76 as of 2018-9-14. The fund has total assets (including Capital Units) of 255-million as of 2018-8-31.

BK.PR.A was extended in December, 2012, in accordance with a vote taken in 2011.

According to the 2018 Annual Information Form:

In the event that the Termination Date is extended in any Extension Year, each holder of Preferred Shares or Class A Shares shall have the right to retract such Preferred Shares or Class A Shares effective December 1 of such Extension Year (the “Recurring Special Retraction Right”). The price payable per Preferred Share so retracted shall be equal to (i) the sum of (A) the lesser of (x) $10.00 and (y) the net asset value of the Company calculated on November 30 of such Extension Year, divided by the number of Preferred Shares then outstanding, plus (B) an amount equal to the accrued and unpaid dividends on each Preferred Share to but excluding November 30 of such Extension Year, plus (ii) all declared and unpaid dividends thereon to but excluding November 30 of such Extension Year. The price payable per Class A Share so retracted shall be equal to the greater of (i) the net asset value per Unit calculated on November 30 of such Extension Year less $10.00, and (ii) zero. Holders of Preferred Shares or Class A Shares wishing to take advantage of the Recurring Special Retraction Right must surrender their Preferred Shares or Class A Shares for retraction no later than the close of business on November 1 of such Extension Year (or, if November 1 of such year is not a business day, on the immediately preceding business day). Payment of the retraction price per Preferred Share or Class A Share owing in respect of the exercise of the Recurring Special Retraction Right will be made on or before December 15 of such Extension Year (or, if December 15 of such year is not a business day, on the immediately succeeding business day).

November 1 is a Thursday this year so the deadline to notify the company of a desire to retract is November 1 (brokerages will set their internal deadlines a few days earlier). BK.PR.A is currently trading above its retraction price, however, so in the absence of extortionate transaction costs, holders who want to get out are better off selling.

LFE.PR.B To Be Extended with Dividend Boost

Thursday, September 27th, 2018

Quadravest Capital Management has announced:

Canadian Life Companies Split Corp (the “Company”) is pleased to announce it has extended the termination date of the Company a further six year period from December 1, 2018 to December 1, 2024.

In connection with the extension, the Company will also amend the dividend entitlement of the LFE.PR.B Preferred Shares (“Preferred Shares”) effective December 1, 2018, to pay a cumulative preferential floating rate monthly dividend at an annual rate equivalent to the greater of, (i) 6.5% based on the $10 original issue price and (ii) the prevailing Canadian Prime Rate plus 2% annually based on the $10 original issue price, to a maximum of 8%. Based on the current Prime Rate of 3.7%, the annual rate would be 6.5%, which represents an increase of 0.25% per annum from the current rate of 6.25%.

The dividend policy for the LFE Class A Shares (“Class A Shares”) will remain unchanged.

In connection with the extension, the Company will offer a Special Retraction Right which will allow existing shareholders to tender one or both classes of Shares and receive a retraction price based on the November 30, 2018 net asset value per unit.

Since inception of the Company, Class A Shares have received a total of $7.15 per share and Preferred Shares have received a total of $7.64 per share, for a combined total of $14.79.

The Company invests in a portfolio of four publicly traded Canadian life insurance companies as follows: Great-West Lifeco Inc., Industrial Alliance Insurance & Financial Services Inc., Manulife Financial Corporation and Sun Life Financial Inc.

LFE.PR.B came into being in 2012, when it was received in exchange from LFE.PR.A (warrants were also part of the exchange consideration). The dividend was set to 6.25% – they had to be generous, because the NAVPU at the time was only about 11.55. The NAVPU is now 13.94 as of September 14, 2018.

From the Annual Information Form comes the following information:

In the event that the Termination Date is extended in any Extension Year, each holder of Preferred Shares or Class A Shares shall have the right to retract such Preferred Shares or Class A Shares effective December 1 of such Extension Year (the “Recurring Special Retraction Right”). The price payable per Preferred Share so retracted shall be equal to (i) the sum of (A) the lesser of (x) $10.00 and (y) the net asset value of the Company calculated on November 30 of such Extension Year, divided by the number of Preferred Shares then outstanding, plus (B) an amount equal to the accrued and unpaid dividends on each Preferred Share to but excluding November 30 of such Extension Year, plus (ii) all Dividends Owing thereon to but excluding November 30 of such Extension Year. The price payable per Class A Share so retracted shall be equal to the greater of (i) the net asset value per Unit calculated on November 30 of such Extension Year less $10.00, and (ii) zero. Holders of Preferred Shares or Class A Shares wishing to take advantage of the Recurring Special Retraction Right must surrender their Preferred Shares or Class A Shares for retraction no later than the close of business on November 1 of such Extension Year (or, if November 1 of such year is not a business day, on the immediately preceding business day). Payment of the retraction price per Preferred Share or Class A Share owing in respect of the exercise of the Recurring Special Retraction Right will be made on or before December 15 of such Extension Year (or, if December 15 of such year is not a business day, on the immediately succeeding business day).

November 1 is a Thursday this year, so the deadline to notify the company of a desire to retract is November 1 (brokerages will set their internal deadlines a few days earlier). LFE.PR.B is currently trading above its retraction price, however, so in the absence of extortionate transaction costs, holders who want to get out are better off selling.

BNS.PR.B & BNS.PR.Q to be Redeemed

Tuesday, September 25th, 2018

The Bank of Nova Scotia has announced:

that it intends to exercise its right to redeem all outstanding Non-cumulative Preferred Shares Series 20 of Scotiabank (the “Series 20 Shares”) and Non-cumulative Preferred Shares Series 21 of Scotiabank (the “Series 21 Shares”) on October 26, 2018, at a price equal to $25.00 per share, together with all declared and unpaid dividends. Formal notice will be issued to holders of the Series 20 Shares and Series 21 Shares in accordance with the share conditions. The redemption has been approved by the Office of the Superintendent of Financial Institutions.

On August 28, 2018, the Board of Directors of Scotiabank announced a quarterly dividend of $0.225625 per Series 20 Share, and $0.187403 per Series 21 Share. This will be the final dividend on the Series 20 Shares and Series 21 Shares, and will be paid on the date of the redemption, October 26, 2018, to shareholders of record at the close of business on October 2, 2018. After October 26, 2018, the Series 20 Shares and Series 21 Shares will cease to be entitled to dividends.

BNS.PR.Q (Series 20) was announced 2008-05-27 as a FixedReset, 5.00+170, and commenced trading 2008-6-10. After an extension announcement it reset at 3.61% in 2013.

At that time, there was a partial conversion to BNS.PR.B, the FloatingReset.