Archive for the ‘Issue Comments’ Category

CWB.PR.B To Reset At 4.301%

Monday, April 1st, 2019

Canadian Western Bank has announced:

the applicable dividend rates for its non-cumulative 5-year rate reset First Preferred Shares Series 5 (the “Series 5 Preferred Shares”) (TSX: CWB.PR.B) and non-cumulative floating rate First Preferred Shares Series 6 (the “Series 6 Preferred Shares”).

With respect to any Series 5 Preferred Shares that remain outstanding after April 30, 2019, commencing as of such date, holders thereof will be entitled to receive fixed rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of CWB and subject to the provisions of the Bank Act (Canada). The dividend rate for the five-year period commencing on May 1, 2019, and ending on April 30, 2024, will be 4.301% per annum or $0.2688125 per share per quarter, being equal to the sum of the five-year Government of Canada bond yield as at April 1, 2019, plus 2.76%, as determined in accordance with the terms of the Series 5 Preferred Shares.

With respect to any Series 6 Preferred Shares that may be issued on May 1, 2019 in connection with the conversion of the Series 5 Preferred Shares into the Series 6 Preferred Shares, holders thereof will be entitled to receive floating rate non-cumulative preferential cash dividends on a quarterly basis, calculated on the basis of actual number of days elapsed in each quarterly floating rate period divided by 365, as and when declared by the Board of Directors of CWB and subject to the provisions of the Bank Act (Canada). The dividend rate for the three-month period commencing on May 1, 2019, and ending on July 31, 2019, will be 1.103% (4.412% on an annualized basis) or $0.27575 per share, being equal to the sum of the three-month Government of Canada Treasury bill yield as at April 1, 2019, plus 2.76%, as determined in accordance with the terms of the Series 6 Preferred Shares.

Beneficial owners of Series 5 Preferred Shares who wish to retain their Series 5 Preferred Shares do not need to take any further action. Beneficial owners of Series 5 Preferred Shares who wish to exercise their right of conversion should instruct their broker or other nominee to exercise such right before 5:00 p.m. (EDT) on April 15, 2019. The news release announcing such conversion right was issued on March 11, 2019 and can be viewed on SEDAR or CWB’s website. Conversion inquiries should be directed to CWB’s Registrar and Transfer Agent, Computershare Trust Company of Canada, at 1-800-564-6253.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 6 Preferred Shares effective upon conversion. Listing of the Series 6 Preferred Shares is subject to CWB fulfilling all the listing requirements of the TSX and, upon approval, the Series 6 Preferred Shares will be listed on the TSX under the trading symbol “CWB.PR.E”.

CWB.PR.B is a FixedReset, 4.40%+276, that commenced trading 2014-2-10 after being announced 2014-1-31. The extension was announced 2019-3-11. The issue is tracked by HIMIPref™ but relegated to the Scraps – FixedReset (Discount) index on credit concerns.

Note that the reset rate for CWB.PR.B implies a GOC-5 yield of 1.541%, whereas the TRP.PR.D reset implies 1.523%. This is not necessarily a problem. The prospectus for CWB.PR.B (available at SEDAR, search for “Canadian Western Bank Feb 3 2014 19:39:17 ET Prospectus supplement – English PDF 242 K”; sorry I can’t link directly but the Canadian Securities Administrators do not believe that investor scum should have easy access to public ha-ha documents) states:

“Initial Fixed Rate Period” means the period commencing on the Closing Date and ending on and including April 30, 2019.

…while the TRP.PR.D prospectus (kudos to TransCanada for posting the prospectus on their website!) states:

‘‘Initial Fixed Rate Period’’ means the period from and including the date of issue of the Series 7 Shares to but excluding April 30, 2019.

What a difference a day makes!

The most logical way to analyze the question of whether or not to convert is through the theory of Preferred Pairs, for which a calculator is available. Briefly, a Strong Pair is defined as a pair of securities that can be interconverted in the future (e.g., CWB.PR.B and the FloatingReset that will exist if enough holders convert). Since they will be interconvertible on this future date, it may be assumed that they will be priced identically on this date (if they aren’t then holders will simply convert en masse to the higher-priced issue). And since they will be priced identically on a given date in the future, any current difference in price must be offset by expectations of an equal and opposite value of dividends to be received in the interim. And since the dividend rate on one element of the pair is both fixed and known, the implied average rate of the other, floating rate, instrument can be determined. Finally, we say, we may compare these average rates and take a view regarding the actual future course of that rate relative to the implied rate, which will provide us with guidance on which element of the pair is likely to outperform the other until the next interconversion date, at which time the process will be repeated.

We can show the break-even rates for each FixedReset / FloatingReset Strong Pair graphically by plotting the implied average 3-month bill rate against the next Exchange Date (which is the date to which the average will be calculated).

pairs_fr_190401
Click for Big

The market has lost its fleeting enthusiasm for floating rate product; the implied rates until the next interconversion are below the current 3-month bill rate as the averages for investment-grade and junk issues are at +0.78% and +1.11%, respectively. Whatever might be the result of the next few Bank of Canada overnight rate decisions, I suggest that it is unlikely that the average rate over the next five years will be lower than current – but if you disagree, of course, you may interpret the data any way you like.

Since credit quality of each element of the pair is equal to the other element, it should not make any difference whether the pair examined is investment-grade or junk, although we might expect greater variation of implied rates between junk issues on grounds of lower liquidity, and this is just what we see.

If we plug in the current bid price of the CWB.PR.B FixedReset, we may construct the following table showing consistent prices for its soon-may-be-issued FloatingReset counterpart given a variety of Implied Breakeven yields consistent with issues currently trading:

Estimate of FloatingReset (received in exchange for CWB.PR.B) Trading Price In Current Conditions
  Assumed FloatingReset
Price if Implied Bill
is equal to
FixedReset Bid Price Spread 1.50% 1.00% 0.50%
CWB.PR.B 19.00 276bp 18.96 18.47 17.97

Based on current market conditions, I suggest that the FloatingResets that will result from conversion are likely to trade below the price of their FixedReset counterparts, CWB.PR.B. Therefore, it seems likely that I will recommend that holders of CWB.PR.B continue to hold the issue and not to convert, but I will wait until it’s closer to the April 15 notification deadline before making a final pronouncement. I will note that once the FloatingResets commence trading (if, in fact, they do) it may be a good trade to swap the FixedReset for the FloatingReset in the market once both elements of each pair are trading and you can – presumably, according to this analysis – do it with a reasonably good take-out in price, rather than doing it through the company on a 1:1 basis. But that, of course, will depend on the prices at that time and your forecast for the path of policy rates over the next five years. There are no guarantees – my recommendation is based on the assumption that current market conditions with respect to the pairs will continue until the FloatingResets commence trading and that the relative pricing of the two new pairs will reflect these conditions.

TRP.PR.D To Reset At 3.903%

Monday, April 1st, 2019

TransCanada Corporation has announced:

that it has notified the registered shareholder of the applicable dividend rates for Cumulative Redeemable First Preferred Shares, Series 7 (Series 7 Shares) and the Cumulative Redeemable First Preferred Shares, Series 8 (Series 8 Shares).

As previously announced in our news release dated March 15, 2019, holders of the Series 7 Shares have the right on April 30, 2019 to convert, on a one-for-one basis, any or all of their Series 7 Shares into Series 8 Shares and receive a floating rate quarterly dividend, or retain any or all of their Series 7 Shares and receive a new fixed rate quarterly dividend.

Should a holder of Series 7 Shares choose to retain their shares, such shareholders will receive the new annual fixed dividend rate applicable to the Series 7 Shares of 3.903% for the five-year period commencing April 30, 2019 to, but excluding, April 30, 2024.

Should a holder of Series 7 Shares choose to convert their shares to Series 8 Shares, holders of Series 8 Shares will receive the floating quarterly dividend rate applicable to the Series 8 Shares of 4.032% for the first quarterly floating rate period commencing effective April 30, 2019 to, but excluding, July 30, 2019. The floating quarterly dividend rate will be reset every quarter.

Beneficial owners of Series 7 Shares who do not provide notice or communicate with their broker or other nominee by 5 p.m. (EDT) on April 15, 2019 will retain their Series 7 Shares and receive the new annual fixed dividend rate applicable to the Series 7 Shares stated above.

For more information on the terms of, and risks associated with an investment in the Series 7 Shares and the Series 8 Shares, please see the prospectus supplement dated February 25, 2013 which is available on sedar.com or on our website.

TRP.PR.D is a FixedReset, 4.00%+238, that commenced trading 2013-3-4 after being announced 2013-2-25. The extension was announced 2019-3-15. The issue is tracked by HIMIPref™ and assigned to the FixedReset (Discount) subindex.

Note that the reset rate for CWB.PR.B announced today implies a GOC-5 yield of 1.541%, whereas the TRP.PR.D reset implies 1.523%. This is not necessarily a problem. The prospectus for CWB.PR.B (available at SEDAR, search for “Canadian Western Bank Feb 3 2014 19:39:17 ET Prospectus supplement – English PDF 242 K”; sorry I can’t link directly but the Canadian Securities Administrators do not believe that investor scum should have easy access to public ha-ha documents) states:

“Initial Fixed Rate Period” means the period commencing on the Closing Date and ending on and including April 30, 2019.

…while the TRP.PR.D prospectus (kudos to TransCanada for posting the prospectus on their website!) states:

‘‘Initial Fixed Rate Period’’ means the period from and including the date of issue of the Series 7 Shares to but excluding April 30, 2019.

What a difference a day makes!

The most logical way to analyze the question of whether or not to convert is through the theory of Preferred Pairs, for which a calculator is available. Briefly, a Strong Pair is defined as a pair of securities that can be interconverted in the future (e.g., TRP.PR.D and the FloatingReset that will exist if enough holders convert). Since they will be interconvertible on this future date, it may be assumed that they will be priced identically on this date (if they aren’t then holders will simply convert en masse to the higher-priced issue). And since they will be priced identically on a given date in the future, any current difference in price must be offset by expectations of an equal and opposite value of dividends to be received in the interim. And since the dividend rate on one element of the pair is both fixed and known, the implied average rate of the other, floating rate, instrument can be determined. Finally, we say, we may compare these average rates and take a view regarding the actual future course of that rate relative to the implied rate, which will provide us with guidance on which element of the pair is likely to outperform the other until the next interconversion date, at which time the process will be repeated.

We can show the break-even rates for each FixedReset / FloatingReset Strong Pair graphically by plotting the implied average 3-month bill rate against the next Exchange Date (which is the date to which the average will be calculated).

pairs_fr_190401
Click for Big

The market has lost its fleeting enthusiasm for floating rate product; the implied rates until the next interconversion are below the current 3-month bill rate as the averages for investment-grade and junk issues are at +0.78% and +1.11%, respectively. Whatever might be the result of the next few Bank of Canada overnight rate decisions, I suggest that it is unlikely that the average rate over the next five years will be lower than current – but if you disagree, of course, you may interpret the data any way you like.

Since credit quality of each element of the pair is equal to the other element, it should not make any difference whether the pair examined is investment-grade or junk, although we might expect greater variation of implied rates between junk issues on grounds of lower liquidity, and this is just what we see.

If we plug in the current bid price of the TRP.PR.D FixedReset, we may construct the following table showing consistent prices for its soon-may-be-issued FloatingReset counterpart given a variety of Implied Breakeven yields consistent with issues currently trading:

Estimate of FloatingReset (received in exchange for TRP.PR.D) Trading Price In Current Conditions
  Assumed FloatingReset
Price if Implied Bill
is equal to
FixedReset Bid Price Spread 1.50% 1.00% 0.50%
TRP.PR.D 17.10 238bp 17.08 16.58 16.09

Based on current market conditions, I suggest that the FloatingResets that will result from conversion are likely to trade below the price of their FixedReset counterparts, TRP.PR.D. Therefore, it seems likely that I will recommend that holders of TRP.PR.D continue to hold the issue and not to convert, but I will wait until it’s closer to the April 15 notification deadline before making a final pronouncement. I will note that once the FloatingResets commence trading (if, in fact, they do) it may be a good trade to swap the FixedReset for the FloatingReset in the market once both elements of each pair are trading and you can – presumably, according to this analysis – do it with a reasonably good take-out in price, rather than doing it through the company on a 1:1 basis. But that, of course, will depend on the prices at that time and your forecast for the path of policy rates over the next five years. There are no guarantees – my recommendation is based on the assumption that current market conditions with respect to the pairs will continue until the FloatingResets commence trading and that the relative pricing of the two new pairs will reflect these conditions.

DFN.PR.A To Get Bigger

Monday, April 1st, 2019

Quadravest has announced:

Dividend 15 Split Corp. (the “Company”) is pleased to announce it will undertake an offering of Preferred Shares and Class A Shares of the Company.

The offering will be co-led by National Bank Financial Inc., CIBC World Markets Inc., Scotia Capital Inc. and RBC Capital Markets, and will also include TD Securities Inc., BMO Capital Markets, Canaccord Genuity Corp., Industrial Alliance Securities Inc., Echelon Wealth Partners, GMP Securities L.P., Raymond James Ltd., Desjardins Securities Inc., Mackie Research Capital Corporation, and Manulife Securities Incorporated.

The Preferred Shares will be offered at a price of $9.90 per Preferred Share to yield 5.3% and the Class A Shares will be offered at a price of $9.05 per Class A Share to yield 13.3%. The closing price on the TSX of each of the Preferred Shares and the Class A Shares on March 29, 2019 was $10.15 and $9.10, respectively.

Since inception of the Company, 180 consecutive dividends have been declared for both classes of shares. The aggregate dividends declared on the Preferred Shares have been $7.90 per share and the aggregate dividends declared on the Class A Shares have been $21.50 per share (including five special distributions of $0.25 per share, one special distribution of $0.50 per share and one special stock dividend of $1.75 per share), for a combined total of $29.40 per unit. All distributions to date have been made in tax advantage eligible Canadian dividends or capital gains dividends.

The net proceeds of the offering will be used by the Company to invest in an actively managed, high quality portfolio
consisting of 15 dividend yielding Canadian companies as follows:

Bank of Montreal Enbridge Inc. TELUS Corporation
The Bank of Nova Scotia Manulife Financial Corp. Thomson-Reuters Corporation
BCE Inc. National Bank of Canada The Toronto-Dominion Bank
Canadian Imperial Bank of Commerce Royal Bank of Canada TransAlta Corporation
CI Financial Corp. Sun Life Financial Inc. TransCanada Corporation

The Company’s investment objectives are:

Preferred Shares:
i. to provide holders of the Preferred Shares with fixed, cumulative preferential monthly cash dividends in the
amount of 5.25% annually; and
ii. on or about the termination date, currently December 1, 2024 (subject to further 5 year extensions thereafter), to pay the holders of the Preferred Shares $10.00 per Preferred Share.

Class A Shares:
i. to provide holders of the Class A Shares with regular monthly cash dividends currently targeted to be $0.10 per
share; and
ii. on or about the termination date, currently December 1, 2024 (subject to further 5 year extensions thereafter) to pay holders of Class A Shares at least the original issue price of those shares.

The sales period of this overnight offering will end at 9:00 a.m. EST on April 2, 2019. The offering is expected to close on or about April 9, 2019 and is subject to certain closing conditions including approval by the TSX.

So they’re offering Whole Units at 18.95 and the NAVPU is 17.80 as of March 15 for a premium of about 6.5%. What a lovely little business it is!

Update, 2019-4-2: They raised over 555-million:

Dividend 15 Split Corp. (the “Company”) is pleased to announce it has completed the overnight marketing of up to 2,981,000 Preferred Shares and up to 2,981,000 Class A Shares of the Company. Total proceeds of the offering are expected to be approximately $56.5 million.

DC.PR.E To Be Converted By Issuer

Thursday, March 28th, 2019

Dundee Corporation has announced:

it has provided notice in accordance with the provisions of the articles of amendment of the Corporation dated February 8, 2016 (the “Articles of Amendment”) that effective May 15, 2019 (the “Conversion Date”) it intends to convert all of the outstanding first preference shares, series 5 (the “Series 5 Shares”) of the Corporation into fully paid, non-assessable and freely tradable class A subordinate voting shares (the “Subordinate Voting Shares”) of the Corporation.

“We believe our decision to convert the Series 5 Shares into class A subordinate voting shares is prudent and aligned with the best interests of the Corporation and its stakeholders,” said Jonathan Goodman, Executive Chairman of the Corporation. “This conversion allows us to maintain financial flexibility and balance sheet strength to support our longer-term strategic objectives.”

The number of Subordinate Voting Shares into which the Series 5 Shares of each registered holder will be converted will be equal to the product of:

(a) the number obtained when:

i. $25.48, being the applicable redemption price of $25.25 per Series 5 Share on the Conversion Date, plus an amount equal to all accrued and unpaid dividends per Series 5 Share up to but excluding the date fixed for conversion (less any tax required to be deducted and withheld by the Corporation),

is divided by

ii. the greater of: (A) $2.00, and (B) 95% of the weighted average trading price of the Subordinate Voting Shares on the TSX for the 20 consecutive trading days ending on the fourth day prior to the Conversion Date, or, if such fourth day is not a trading day, the immediately preceding trading day (the greater of such amounts being, the “Weighted Price”),

with the result of the calculation being rounded upward to the nearest 1/100 of a Subordinate Voting Share; and

(b) the number of Series 5 Shares of the registered holder being converted.

The Company expects to issue approximately 42 million Subordinate Voting Shares in connection with the conversion of the 3,294,938 outstanding Series 5 shares.

Where a fraction of a Subordinate Voting Share would otherwise be issuable on conversion of Series 5 Shares, the Corporation will adjust such fractional interest by payment by cheque in an amount equal to the then market price of such fractional interest computed on the basis of the Weighted Price, as determined in respect of the Conversion Date.

From and after the Conversion Date, the registered holders of Series 5 Shares so converted will cease to be entitled to dividends on such Series 5 Shares or to exercise any of the rights of holders of Series 5 Shares in respect of such shares except the right to receive therefor the whole number of Subordinate Voting Shares to which they are entitled and payment with respect to a fraction of a Subordinate Voting Share as contemplated in the Articles of Amendment, and the registered holder thereof will become a registered holder of Subordinate Voting Shares of record, effective on the Conversion Date.

ISSUER BID

The Company also announced that in connection with the conversion of the Series 5 Shares, it is considering the implementation of a normal course issuer bid or a substantial issuer bid in respect of its Subordinate Voting Shares, which would commence, subject to board of director and regulatory approvals, following the Conversion Date.

This press release is for informational purposes only and does not constitute an offer to buy or the solicitation of an offer to sell Subordinate Voting Shares. Any solicitation to sell or offer to buy Subordinate Voting Shares will only be made in accordance with applicable securities laws and the rules of the Toronto Stock Exchange.

DC.PR.E came into existence by an exchange from DC.PR.C, after an initial proposal in November, 2015 that attracted some press coverage and an exhortation to consider exercising dissent rights. This led to reconsideration by Dundee despite a rather peculiar endorsement from a proxy advisor and led to a sweeter offer that attracted further commentary. Finally, the company announced a ringing endorsement from the shareholders … or perhaps it would be better to say “the shareholders’ advisors”, since the proxy solicitation fee was so high! DC.PR.E commenced trading 2016-2-12.

Accellerating losses in 2018 led to shareholder pressure for a means to avoid a redemption of the issue for cash prior to the scheduled 2019-6-30 retraction date.

I note the sentence in the press release that the company “expects to issue approximately 42 million Subordinate Voting Shares in connection with the conversion of the 3,294,938 outstanding Series 5 shares.” I note that the company has 57,985,136 shares of DC.A outstanding … fortunately, however, the founding family controls the company through multiple voting shares, so this destruction of shareholder value won’t have as much adverse effect on them as might otherwise be the case.

VNR.PR.A To Be Acquired At $25.00 Under Plan of Arrangement

Wednesday, March 27th, 2019

Valener Inc. has announced that it:

and Noverco Inc. (“Noverco”), the controlling partner of Energir, L.P., announced today that they have entered into a definitive arrangement agreement (the “Arrangement Agreement”) pursuant to which Noverco will acquire indirectly all of the issued and outstanding common shares of Valener (the “Common Shares”) for $26.00 per Common Share in cash and all of the issued and outstanding Cumulative Rate Reset Preferred Shares, Series A of Valener (the “Preferred Shares”) for $25.00 per Preferred Share in cash plus accrued and unpaid dividends (the “Arrangement”).

Transaction Highlights

  • Cash consideration of $26.00 per Common Share represents a premium of approximately 30% to the closing price per Common Share on December 12, 2018 (the day prior to Noverco’s initial approach to Valener regarding a potential transaction) and approximately 10% to the all-time high closing price per Common Share of $23.67 observed on March 22, 2019.
  • Cash consideration of $25.00 per Preferred Share represents a premium of approximately 18% to the closing price per Preferred Share on December 12, 2018.
  • The acquisition of all of the outstanding Common Shares and Preferred Shares implies a total enterprise value for Valener of approximately $1.2 billion, including the assumption of existing indebtedness.
  • 100% cash consideration provides immediate liquidity and certainty of value for holders of Common Shares and holders of Preferred Shares.
  • BMO Capital Markets and TD Securities provided opinions that, subject to the assumptions, limitations and qualifications contained therein, the cash consideration to be received is fair from a financial point of view to the holders of Common Shares and the holders of Preferred Shares; further, cash consideration to be received by holders of Common Shares falls within the fair market value range of $24.00 to $28.50 per Common Share established by TD Securities as independent valuator.


Under the Arrangement, it is proposed that the Preferred Shares will also be acquired by Noverco. Pursuant to the Arrangement Agreement, holders of Preferred Shares will be asked to vote on the Arrangement as a separate class. However, completion of the Arrangement is not conditional on receipt of such approval. If the requisite approval from holders of Preferred Shares is not obtained, such Preferred Shares will be excluded from the Arrangement and remain outstanding in accordance with their terms. For the Preferred Shares to be included in the Arrangement, the resolution approving the Arrangement must be approved by holders of not less than 66 2/3% of Preferred Shares present in person or by proxy at the Special Meeting.

That’s a nice little windfall for holders of VNR.PR.A, which closed at 21.31-73 today, after trading 310 shares!

The issue commenced trading 2012-6-6 as a FixedReset, 4.35%+281, after being announced 2012-5-15. It reset to 4.62% effective 2017-10-15. I recommended against conversion and there was no conversion to FloatingResets. The issue is tracked by HIMIPref™ and has been assigned to the FixedReset subindex.

LBS.PR.A To Get Bigger

Wednesday, March 27th, 2019

Brompton Group has announced:

Life & Banc Split Corp. (the “Company”) is pleased to announce it is undertaking an overnight treasury offering of class A and preferred shares (the “Class A Shares” and “Preferred Shares”, respectively).

The sales period for this overnight offering will end at 9:00 a.m. (ET) on Thursday, March 28, 2019. The offering is expected to close on or about April 4, 2019 and is subject to certain closing conditions including approval by the Toronto Stock Exchange (“TSX”).

The Class A Shares will be offered at a price of $8.10 per Class A Share for a distribution rate of 14.8% on the issue price, and the Preferred Shares will be offered at a price of $10.00 per Preferred Share for a yield to maturity of 5.46%.(1) The closing price on the TSX for each of the Class A and Preferred Shares on March 26, 2019 was $8.23 and $10.17, respectively. The Class A and Preferred Share offering prices were determined so as to be non-dilutive to the most recently calculated net asset value per unit of the Company (calculated as at March 25, 2019), as adjusted for dividends and certain expenses to be accrued prior to or upon settlement of the offering.

The Company invests in a portfolio (the “Portfolio”) consisting of common shares of the six largest Canadian banks and the four major publicly traded Canadian life insurance companies:

The Bank of Nova Scotia Royal Bank of Canada
National Bank of Canada Industrial Alliance Insurance and Financial Services Inc.
The Toronto-Dominion Bank Great-West Lifeco Inc.
Canadian Imperial Bank of Commerce Manulife Financial Corporation
Bank of Montreal Sun Life Financial Inc.

The investment objectives for the Class A Shares are to provide holders with regular monthly cash distributions targeted to be $0.10 per Class A Share and to provide the opportunity for growth in the net asset value per Class A Share.

The investment objectives for the Preferred Shares are to provide holders with fixed cumulative preferential quarterly cash distributions, currently in the amount of $0.13625 per Preferred Share ($0.545 per annum), and to return the original issue price plus accrued dividends (if any) to holders of Preferred Shares on October 30, 2023.

The syndicate of agents for the offering is being led by RBC Capital Markets, CIBC Capital Markets, National Bank Financial Inc. and Scotiabank.

The sum of the Capital Units NAVPS and the Preferred Share NAVPS is 17.79, while the new Whole Units are offered at 18.10, so the premium is about 1.7% – smaller than most offerings we’ve seen in the past while, but still worth doing (especially if you earn management fees on the total)!

Update, 2019-3-28: The offering went well:

Life & Banc Split Corp. (the “Company”) is pleased to announce a successful overnight treasury offering of class A and preferred shares (the “Class A Shares” and “Preferred Shares”, respectively). Gross proceeds of the offering are expected to be approximately $25.5 million. The offering is expected to close on or about April 4, 2019 and is subject to certain closing conditions including approval by the Toronto Stock Exchange (the “TSX”). The Company has granted the Agents (as defined below) an over-allotment option, exercisable for 30 days following the closing date of the offering, to purchase up to an additional 15% of the number of Class A Shares and Preferred Shares issued at the closing of the offering.

AZP Now Outlook-Positive, Says S&P

Wednesday, March 27th, 2019

Standard & Poor’s has announced:

  • •Atlantic Power Corp.’s (APC) leverage improved in 2018 and we believe the Boston-based publicly traded power generation company’s deleveraging trend is likely to continue, supported by the predictability of cash flows from power purchase agreements (PPAs) in the portfolio.
  • •We expect APC to complete the acquisition of two biomass projects in South Carolina with long-term PPAs during the second half of 2019, which will help mitigate some recontracting risk.
  • •S&P Global Ratings is affirming our ‘B+’ issuer credit rating, our ‘BB-‘ issue-level rating on APC’s senior term loan B, senior revolving credit facility, and medium-term notes, and our ‘CCC+’ issue-level rating on the preferred shares.
  • •Our ‘2’ recovery rating on all debt tranches is unchanged, indicating our expectation for substantial recovery (70%-90%; rounded estimate: 80%) in the event of a default.
  • •The positive outlook reflects a possibility that we could upgrade APC by one notch because we believe the company can achieve our adjusted debt to EBITDA of below 5x in the next 12 months.


If APC meets our adjusted debt-to-EBITDA projection of below 5x, it would likely be supported by deleveraging through excess cash flow sweep on the term loan B in line with management’s guidance and by demonstrating its ability to continue extending expiring PPAs. The rating could also improve if the company continues to pursue growth opportunities while maintaining S&P Global Ratings’ adjusted leverage.

We could revise the outlook back to stable if our adjusted debt to EBITDA indicates an increasing trend above 5x on a sustained basis. This may be due to the inability to recontract expiring or obtain new PPAs, aggressive growth strategy through incremental debt issuances, or higher-than-expected operating costs to maintain power assets in the portfolio, creating volatility in cash flows available for debt service.

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

TA Placed on Watch-Negative by S&P

Tuesday, March 26th, 2019

Standard & Poor’s has announced:

  • •Calgary, Alta.-based TransAlta Corp. has announced that it entered into an agreement with Brookfield Renewable Partners L.P. with respect to the partial sale of TransAlta’s Alberta hydro assets.
  • •As part of this transaction, TransAlta will issue C$350 million in debentures to Brookfield over the coming weeks, mainly to fund future shareholder returns and subsequently issue C$400 million in preferred stock in October 2020 to repay debt maturing in November 2020. Brookfield will also increase its equity investment in TransAlta to 9%. The debentures and preferred shares are expected to convert to a partial interest in TransAlta’s hydro assets in 2025.
  • •S&P Global Ratings placed its ‘BBB-‘ issuer credit rating on TransAlta and its issue-level ratings on the company’s debt on CreditWatch with negative implications.
  • •TransAlta’s leverage remains elevated for the rating, and the CreditWatch placement reflects a greater than 1-in-2 chance of a downgrade if we are not convinced that the company can improve its funds from operations (FFO) to debt to about 22% or debt to EBITDA would not decrease below 3.5x by 2020.
  • •We expect to resolve the CreditWatch over the next 90 days after meeting with company management to evaluate its plans to reduce leverage over the next two years and to manage execution risk while increasing its natural gas and renewables generation portfolio.


The negative CreditWatch placement follows TransAlta’s announcement that it entered into an agreement with Brookfield to sell to Brookfield a partial interest in its Alberta based hydro assets.

DBRS takes a milder view, as discussed yesterday.

Affected issues are TA.PR.D, TA.PR.E, TA.PR.F, TA.PR.H and TA.PR.J.

AQN.PR.D : No Conversion To FloatingReset

Friday, March 22nd, 2019

Algonquin Power & Utilities Corp. has announced:

that none of its outstanding 4,000,000 Cumulative Rate Reset Preferred Shares, Series D (the “Series D Preferred Shares”) will be converted on April 1, 2019, into Cumulative Floating Rate Preferred Shares, Series E (the “Series E Preferred Shares”) of the Company. During the conversion notice period which ran from March 1, 2019 to March 15, 2019, less than 1,000,000 Series D Preferred Shares were tendered for conversion into Series E Preferred Shares.

As per the terms and conditions of the Series D Preferred Shares described in the prospectus supplement of the Company dated February 25, 2014 to a short form base shelf prospectus of the Company dated February 18, 2014 relating to the issuance of Series D Preferred Shares, since there would remain outstanding on April 1, 2019, after having taken into account all Series D Preferred Shares tendered for conversion into Series E Preferred Shares, less than 1,000,000 Series E Preferred Shares, holders of Series D Preferred Shares who tendered their Series D Preferred Shares for conversion will not be entitled to convert their Series D Preferred Shares into Series E Preferred Shares. As a result, Series E Preferred Shares will not be issued at this time.

It will be recalled that AQN.PR.D will reset at 5.091% effective March 31, 2019.

AQN.PR.D is a FixedReset, 5.00%+328, that commenced trading 2014-3-5 after being announced 2014-2-24. The extension was announced 2019-2-26 and the reset to 5.091% effective March 31, 2019 was announced 2019-3-1. I recommended against conversion. The issue is tracked by HIMIPref™ but relegated to the Scraps-FixedReset (Discount) subindex on credit concerns.

BAM.PF.B : No Conversion To FloatingReset

Wednesday, March 20th, 2019

Brookfield Asset Management Inc. has announced:

that after having taken into account all election notices received by the March 18, 2019 deadline for the conversion of its Cumulative Class A Preference Shares, Series 34 (the “Series 34 Shares”) (TSX: BAM.PF.B) into Cumulative Class A Preference Shares, Series 35 (the “Series 35 Shares”), there were 53,649 Series 34 Shares tendered for conversion, which is less than the one million shares required to give effect to conversions into Series 35 Shares. Accordingly, there will be no conversion of Series 34 Shares into Series 35 Shares.

BAM.PF.B is a FixedReset, 4.20%+263, that commenced trading 2012-9-12 after being announced 2012-8-23. It resets to 4.437% effective 2019-4-1. I recommended against conversion. The issue is tracked by HIMIPref™ and assigned to the FixedReset (Discount) sub-index.