PrefBlog

Aimia Inc. has announced (on 2024-2-22):

that it does not intend to exercise its right to redeem its currently outstanding Cumulative Rate Reset Preferred Shares, Series 3 (“Series 3 Shares”) (TSX: AIM.PF.C) on March 31, 2024. As a result, subject to certain conditions, the holders of the Series 3 Shares have the right to convert all or part of their Series 3 Shares on a one-for-one basis into Cumulative Floating Rate Preferred Shares, Series 4 of Aimia (“Series 4 Shares”) on April 1, 2024 (March 31, 2024 falling on a Sunday, a non-business day). Holders who do not exercise their right to convert their Series 3 Shares into Series 4 Shares will retain their Series 3 Shares.

The foregoing conversion right is subject to the conditions that: (i) if Aimia determines that there would be fewer than 1,000,000 Series 3 Shares outstanding after April 1, 2024, then all remaining Series 3 Shares will automatically be converted into Series 4 Shares on a one-for-one basis on April 1, 2024; and alternatively (ii) if Aimia determines that there would be less than 1,000,000 Series 4 Shares after April 1, 2024 no Series 3 Shares will be converted into Series 4 Shares. There are currently 4,355,263 Preferred Series 3 Shares outstanding.

The annual fixed dividend rate applicable to the Series 3 Preferred Shares for the 5-year period from and including March 31, 2024 to but excluding March 31, 2029, and the floating quarterly dividend rate applicable to the Series 4 Preferred Shares for the 3-month period from and including March 31, 2024 to but excluding June 30, 2024 will be announced by a news release on March 1, 2024.

Beneficial holders of Series 3 Shares who wish to exercise their right of conversion during the conversion period, which runs from March 1, 2024 to March 18, 2024 at 5:00 pm (Eastern Time), should communicate with their broker or other intermediary for more information as soon as possible. It is recommended that holders do this well in advance of the deadline date to provide their broker or intermediary sufficient time to complete necessary steps. All notices received after the deadline date will not be valid.

All inquiries regarding the conversion of Aimia’s Series 3 Preferred Shares should be directed to the Company’s Transfer Agent, TSX Trust Company at 1-800-387-0825 or shareholderinquiries@tmx.com.

AIM.PR.C was issued as a FixedReset, 6.25%+420, that commenced trading 2014-1-15 after being announced 2014-1-6. The extension was announced 2019-2-26. AIM.PR.C reset at 6.011% effective 2019-3-31 (not 6.01%, as stated in the original press release) I recommended against conversion and there was no conversion. The issue is tracked by HIMIPref™ but relegated to the Scraps-FixedReset (Discount) subindex on credit concerns.

Brompton Group has announced (on 2024-2-28):

that the distribution rate for the preferred shares (the “Preferred Shares”) for the 5-year term from April 30, 2024 to April 27, 2029 will be $0.70 per Preferred Share per annum (7.0% on the par value of $10.00) payable quarterly. This represents a pre-tax interest equivalent yield of approximately 9.1%.(1) The Preferred Share distribution rate is based on current market rates for preferred shares with similar terms.

The term extension offers preferred shareholders the opportunity to enjoy preferential cash dividends until April 27, 2029. Over the past 10-year period to January 31, 2024, the Preferred Share has delivered a 6.1% per annum return.(2) The Preferred Share has delivered consistent returns with less volatility and has outperformed the S&P/TSX Preferred Share Index over the past 10-year period by 4.2% per annum.(2)

Annual Compound Returns(2)	1-Year	3-Year	5-Year	10-Year
Preferred Shares (TSX: LCS.PR.A)	6.4%	6.4%	6.4%	6.1%
S&P/TSX Preferred Share Index	4.5%	2.2%	3.9%	1.9%

In addition, the Fund intends to maintain the targeted monthly class A share (the “Class A Share”) distribution rate at $0.075 per Class A Share.(3) The Class A Share has outperformed both the S&P/TSX Capped Financials Index and the S&P/TSX Composite Index over the past 1, 3, 5, and 10-year periods. (2) Over the past 10-year period to January 31, 2024, the Class A Share has delivered an 11.6% per annum return, outperforming the S&P/TSX Capped Financials Index and the S&P/TSX Composite Index (the “TSX Composite”) by 2.0% per annum and 4.0% per annum, respectively. (2)

Annual Compound Returns(2)	1-Year	3-Year	5-Year	10-Year
Class A Shares (TSX: LCS)	39.8%	32.4%	25.5%	11.6%
S&P/TSX Capped Financials Index	4.6%	12.1%	9.8%	9.6%
S&P/TSX Composite Index	4.7%	10.0%	9.6%	7.6%

Since inception on April 18, 2007 to January 31, 2024, Class A shareholders have received cash distributions of $8.36 per Class A Share. Class A shareholders have the option to benefit by reinvesting their cash distributions in a distribution reinvestment plan (“DRIP”) which is commission free to participants. Class A shareholders can enroll in the DRIP program by contacting their investment advisor.

The Fund invests in a portfolio of common shares of Canada’s four largest publicly-listed life insurance companies, on an approximately equal weight basis: Great-West Lifeco Inc., iA Financial Group, Manulife Financial Corporation and Sun Life Financial Inc.

In connection with the extension, shareholders who do not wish to continue their investment in the Fund, will be able to retract their Preferred Shares or Class A Shares on April 29, 2024 pursuant to a special retraction right and receive a retraction price that is calculated in the same way that such price would be calculated if the Fund were to terminate on April 29, 2024. Pursuant to this option, the retraction price may be less than the market price if the security is trading at a premium to net asset value. To exercise this retraction right, shareholders must provide notice to their investment dealer by March 28, 2024 at 5:00 p.m.(Toronto time). Alternatively, shareholders may sell their Preferred Shares and/or Class A Shares through their securities dealer for the market price at any time, potentially at a higher price than would be achieved through retraction, or shareholders may take no action and continue to hold their shares.

Thanks to Assiduous Reader niagara for bringing this to my attention!

Algonquin Power & Utilities Corp. has announced:

that it does not intend to exercise its right to redeem all or part of the currently outstanding 4,000,000 Cumulative Rate Reset Preferred Shares, Series D (the “Series D Preferred Shares”) on April 1, 2024. As a result, subject to certain conditions, the holders of the Series D Preferred Shares have the right to convert all or part of their Series D Preferred Shares, on a one-for-one basis, into Cumulative Floating Rate Preferred Shares, Series E (the “Series E Preferred Shares”) on April 1, 2024 (the “Conversion Date”).

The terms and conditions of the Series D Preferred Shares, including the right to convert, are 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, pursuant to which the Series D Preferred Shares were initially issued for an aggregate of C$100,000,000 (or C$25 per Series D Preferred Share).

Holders of Series D Preferred Shares who do not exercise their right to convert their Series D Preferred Shares into Series E Preferred Shares on the Conversion Date will retain their Series D Preferred Shares.

The dividend rate applicable to the Series D Preferred Shares for the 5-year period from and including March 31, 2024 to but excluding March 31, 2029, and the dividend rate applicable to the Series E Preferred Shares for the 3-month period from and including March 31, 2024 to but excluding June 30, 2024, will be determined on March 1, 2024 and announced by the Company by way of a news release on March 4, 2024.

Beneficial owners of Series D Preferred Shares who wish to exercise their conversion right during the conversion period, which runs from March 4, 2024 to March 18, 2024 at 5:00 p.m. (EST), should communicate as soon as possible with their broker or other nominee for more information. It is recommended that this be done well in advance of the deadline in order to provide the broker or other nominee time to complete the necessary steps. Any notices received after this deadline will not be valid.

The foregoing conversion rights are subject to the following conditions:

• i. If AQN determines that there would on the Conversion Date be fewer than 1,000,000 Series E Preferred Shares outstanding, after having taken into account all Series D Preferred Shares tendered for conversion into Series E Preferred Shares, then holders of Series D Preferred Shares will not be entitled to convert their Series D Preferred Shares into Series E Preferred Shares, and
• ii. alternatively, if AQN determines that there would remain outstanding on the Conversion Date fewer than 1,000,000 Series D Preferred Shares, after having taken into account all Series D Preferred Shares tendered for conversion into Series E Preferred Shares, then all remaining Series D Preferred Shares will automatically be converted into Series E Preferred Shares without the consent of the holders of Series D Preferred Shares, on a one-for-one basis, on the Conversion Date.

In either case, AQN will give written notice to that effect to the registered holder of Series D Preferred Shares no later than March 25, 2024.

AQN.PR.D was issued as 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 and there was no conversion. The issue is tracked by HIMIPref™ but relegated to the Scraps-FixedReset (Discount) subindex on credit concerns.

DBRS has announced that it:

has downgraded its credit rating on the Preferred Shares issued by North American Financial 15 Split Corp. (the Company) to Pfd-4 from Pfd-4 (high). The downgrade is based on the deterioration in downside protection to 32.7% as of January 31, 2024, from 34.7% as of January 31, 2023; the increase in the Preferred Shares’ distribution rate to 9.50% annually on the Preferred Share’s redemption value of $10.0 for the fiscal year beginning December 1, 2023, from 7.75% annually for the fiscal year beginning December 1, 2022; a decline in the dividend coverage ratio to 0.4 times (x); a projected grind of 4.0% per year over the remaining term; and unhedged foreign currency exposure.

The Company invests in a portfolio (the Portfolio) consisting primarily of common shares of 15 high-quality North American financial services companies: Bank of America Corporation; Bank of Montreal; The Bank of Nova Scotia; Canadian Imperial Bank of Commerce; CI Financial Corp.; Citigroup Inc.; The Goldman Sachs Group, Inc.; Great-West Lifeco Inc.; JPMorgan Chase & Co.; Manulife Financial Corporation; National Bank of Canada; Royal Bank of Canada; Sun Life Financial Inc.; The Toronto-Dominion Bank; and Wells Fargo & Company. The Company may invest up to 15% of the net asset value (NAV) in securities of issuers other than the core 15, and no more than 10% of the NAV may be invested in any single issuer. As on August 31, 2023, 10.7% of the Portfolio was also invested in Fifth Third Bancorp, U.S. Bancorp, and Morgan Stanley, and 12% was held in cash. Quadravest Capital Management Inc. is acting as the manager (the Manager) for this Company.

A portion of the Company’s Portfolio is exposed to currency risk as it includes securities denominated in U.S. dollars (USD), while the NAV of the Company is expressed in Canadian dollars. The Company has not entered into currency hedging contracts for the USD portion of the Portfolio, although the Company may use derivatives for hedging purposes. As of August 31, 2023, 50.1% of the Portfolio was invested in USD-denominated assets.

The Fund has an at-the-market equity program (the ATM Program) effective until September 9, 2024, unless terminated prior to such date by the Company. The ATM Program allows the Company to issue Preferred Shares and Class A Shares to the public from time to time at the Company’s discretion. The maximum gross proceeds from the issuance of the shares could be $350.0 million. During the period ended May 31, 2023, 1,982,000 Preferred Shares were sold through the ATM Program at an average selling price of $9.58 per Preferred Share, raising gross proceeds worth $19.0 million. During the same period, 2,939,800 Class A Shares were sold through the ATM Program at an average selling price of $5.49 per Class A Share, raising gross proceeds worth $16.2 million.

The Company’s termination date is December 1, 2024. At maturity, the holders of the Preferred Shares will be entitled to the value of the Company, up to the face amount of the Preferred Shares, in priority to the holders of the Class A Shares. Holders of the Class A Shares will receive the remaining value of the Company. The termination date can be extended for additional terms of five years at the Company’s discretion, but shareholders will be provided with a special retraction right in connection with such extension.

The Preferred Shares distribution rate is set by the board of directors annually and subject to a minimum of 5.5% annually until 2024. Holders of the Preferred Shares used to receive cumulative monthly cash dividends at a rate of 6.75% annually until November 30, 2022. However, with effect from December 1, 2022, this rate increased to 7.75% annually and further to 9.50% with effect from December 1, 2023. Class A shareholders are entitled to receive monthly cash dividends currently targeted to be $0.11335 per Class A share, equivalent to 9.0% annually on the issue price of $15.0. No distributions will be paid to the Class A Shares if the NAV per unit (Unit, consisting of one Preferred Share and one Class A Share) falls below $15.0. Because the NAV per Unit fell below $15.0, distributions to Class A shareholders have been suspended since March 2023.

As of January 31, 2024, the asset coverage ratio was at 1.5x. The downside protection available to holders of the Preferred Shares was 32.7%. The dividend coverage stood at 0.4x, indicating that the current dividend income earned by the Company is not enough to fully cover the Company’s expenses and targeted distributions on the Preferred Shares, which increases the reliance on the Manager to generate a high yield to meet distributions and other expenses without having to liquify portfolio securities. To supplement the Portfolio income, the Company may engage in covered call options and put option writing on all or a portion of the shares held in the Portfolio.

Recent Updates/Treasury Offerings

(1) On May 25, 2023
The Company announced that the Toronto Stock Exchange (the TSX) has accepted its notice of intention to make a Normal Course Issuer Bid (the NCIB) to purchase its Preferred Shares and Class A Shares through the facilities of the TSX and/or alternative Canadian trading systems. The NCIB commenced on May 29, 2023, and terminates on May 28, 2024. Pursuant to the NCIB, the Company proposes to purchase, from time to time, if it is considered advisable, up to 5,408,428 Preferred Shares and 5,514,879 Class A Shares of the Company.

(2) On September 21, 2023
The Company announced that the Preferred Shares distribution rate for the fiscal year beginning December 1, 2023, will be $9.50% per annum, in comparison with the previous rate of 7.75% on the initial issue price of $10.0.

The main constraints to the credit rating are the following:

(1) Volatility in stock prices, along with changes in the dividend policies of the underlying issuers, may result in significant reductions in the Preferred Shares’ dividend coverage or downside protection from time to time.

(2) A Preferred Shares’ dividend coverage that is less than one time.

(3) Reliance on the manager to generate a high yield, through methods such as option writing, on the investment portfolio to meet distributions and other expenses without having to liquidate portfolio securities.

(4) The monthly cash distributions to holders of the Class A Shares which create grind on the Portfolio. This risk is mitigated by a NAV test. Because the NAV per Unit fell below $15.0, distributions to Class A shareholders have been suspended since March 2023.

(5) The concentration of the Portfolio in one industry.

(6) The unhedged portion of the USD-denominated Portfolio that exposes the Portfolio to foreign currency risk.

Brompton Group has announced (on 2024-1-26):

that the distribution rate for the preferred shares (the “Preferred Shares”) for the new term from March 29, 2024 to March 28, 2025 has been increased to $0.825 per Preferred Share per annum (8.25% on the par value of $10) payable quarterly which is an increase from $0.80 per Preferred Share per annum. The new Preferred Share distribution rate is based on current market rates for preferred shares with similar terms.

The Fund invests in an actively managed portfolio consisting primarily of equity securities of dividend-paying (at the time of investment) global energy issuers with a market capitalization of at least $2 billion (at the time of investment) which may include companies operating in energy subsectors and related industries such as oil & gas exploration and production, equipment, services, pipelines, transportation, infrastructure, utilities, among others. The Fund may also invest up to 25% of the value of the portfolio (as measured at the time of investment) in equity securities of other global natural resource issuers which include companies that own, explore, mine, process or develop natural resource commodities or supply goods and services to those companies, including directly or indirectly through exchange-traded funds.

In connection with the extension, shareholders who do not wish to continue their investment in the Fund, will be able to retract Preferred Shares or class A shares (the “Class A Shares”) on March 28, 2024 pursuant to a special retraction right and receive a retraction price that is calculated in the same way that such price would be calculated if the Fund were to terminate on March 28, 2024. Pursuant to this option, the retraction price may be less than the market price if the security is trading at a premium to net asset value. To exercise this retraction right, shareholders must provide notice to their investment dealer by February 29, 2024 at 5:00 p.m. (Toronto time). Alternatively, shareholders may sell their Preferred Shares and/or Class A Shares through their securities dealer for the market price at any time, potentially at a higher price than would be achieved through retraction, or shareholders may take no action and continue to hold their shares.

DBRS has announced that it:

has downgraded its credit rating on the Preferred Shares issued by Financial 15 Split Corp. (the Company) to Pfd-4 (high) from Pfd-3. The rating downgrade is based on the deterioration in downside protection to 42.1% as of January 15, 2024, from 46.1% as of January 31, 2023, the increase in the Preferred Shares’ distribution rate to 9.25% annually on the Preferred Share’s redemption value of $10.0 for the fiscal year beginning December 1, 2023, from 7.50% annually for the fiscal year beginning December 1, 2022, a decline in the dividend coverage ratio to 0.37 times (x), a projected grind of 8.9% per year over the remaining term and unhedged foreign currency exposure.

The Company invests in a portfolio (the Portfolio) consisting primarily of common shares of 15 financial services companies made up of Canadian and U.S. issuers as follows: Bank of America Corporation; Bank of Montreal; The Bank of Nova Scotia; Canadian Imperial Bank of Commerce; CI Financial Corp.; Citigroup Inc.; The Goldman Sachs Group, Inc.; Great-West Lifeco Inc.; JPMorgan Chase & Co.; Manulife Financial Corporation; National Bank of Canada; Royal Bank of Canada; Sun Life Financial Inc.; The Toronto-Dominion Bank; and Wells Fargo & Company. The Company may invest up to 15% of the Net Asset Value (NAV) in securities of issuers other than the core 15, and no more than 10% of the NAV may be invested in any single issuer. As of August 31, 2023, only 1.2% of the Portfolio was also invested in the other two companies, namely Fifth Third Bancorp and AGF Management, and 23.6% was held in cash.

A portion of the Company’s Portfolio is exposed to currency risk because it includes securities denominated in U.S. dollars (USD), while the NAV of the Company is expressed in Canadian dollars. The Company has not entered into currency-hedging contracts for the USD portion of the Portfolio, although the Company may use derivatives for hedging purposes. As of August 31, 2023, 34.4% of the Portfolio was invested in USD-denominated assets.

The Company established an at-the-market (ATM) equity program in November 2021, which was effective until December 22, 2023. Upon termination, the Company has renewed the ATM Program to issue Preferred Shares and Class A Shares to the public from time to time at the Company’s discretion, effective until January 20, 2026, unless terminated prior to such date by the Company. The maximum gross proceeds from the issuance of the shares will be $400.0 million. During the period ended May 31, 2023, 5,691,210 Preferred Shares were sold through the ATM Program at an average selling price of $9.72 per Preferred Share, raising gross proceeds worth $55.3 million. During the same period, 5,806,000 Class A Shares were sold through the ATM Program at an average selling price of $9.23 per Class A Share, raising gross proceeds worth $53.6 million.

The Company’s termination date is December 1, 2025. At maturity, the holders of the Preferred Shares will be entitled to the value of the Company, up to the face amount of the Preferred Shares, in priority to the holders of the Class A Shares. Holders of the Class A Shares will receive the remaining value of the Company. The termination date can be extended for additional terms of five years at the Company’s discretion, but shareholders are provided with a special retraction right in connection with such extension.

The Preferred Shares distribution rate is set by the board of directors annually and subject to a minimum of 5.5% until 2025. Holders of the Preferred Shares used to receive cumulative monthly cash dividends at a rate of 6.75% annually until November 30, 2022. With effect from December 1, 2022, this rate was increased to 7.50% annually and further to 9.25% annually with effect from December 1, 2023. Holders of the Class A Shares are currently receiving monthly distributions of $0.1257 per share, equivalent to 10.1% per annum on the issue price of $15.0. No distributions will be paid to the Class A Shares if the NAV per unit falls below $15.0. The NAV per unit remained above $15.0 during 2023, and distributions to the Class A Shares were regularly paid out.

As of January 15, 2024, the asset coverage ratio is at 1.7x. The downside protection available to holders of the Preferred Shares was 42.1%. Without giving consideration to capital appreciation potential or any source of income other than the dividends earned by the Portfolio, the current Preferred Share distributions together with the distributions on the Class A Shares will create a projected grind on the NAV of the Portfolio of approximately 8.9% per year for the remaining term of the Preferred Shares. To supplement the Portfolio income, the Company may engage in covered call options and put option writing on all or a portion of the shares held in the Portfolio.

Recent Updates/Treasury Offerings

(i) On May 25, 2023
The Company’s announced that the Toronto Stock Exchange (the “TSX”) has accepted its notice of intention to make a Normal Course Issuer Bid (the “NCIB”) to purchase its Preferred Shares and Class A Shares through the facilities of the TSX and/or alternative Canadian trading systems. The NCIB commences on May 29, 2023 and terminates on May 28, 2024. Pursuant to the NCIB, the Company proposes to purchase, from time to time, if it is considered advisable, up to 4,007,080 Preferred Shares and 4,017,102 Class A Shares.

(ii) On September 21, 2023
The Company announced that the Preferred Shares distribution rate for the fiscal year beginning December 1, 2023 will be $9.25% per annum, in comparison to previous rate of 7.50% on the initial issue price of $10.0.

(iii) On December 20, 2023
The Company renewed its ATM Program pursuant to a prospectus supplement dated December 20, 2023 to the Company’s short form base shelf prospectus dated December 19, 2023. The ATM Program allows the Company to issue Class A Shares and Preferred Shares to the public from time to time, at the Company’s discretion. The maximum gross proceeds from the issuance of the shares will be $400.0 million and the ATM Program will be effective until January 20, 2026, unless terminated prior to such date by the Company.

The main constraints to the rating are the following:

(1) Volatility in stock prices along with changes in the dividend policies of the underlying issuers may result in significant reductions in the Preferred Shares’ dividend coverage or downside protection from time to time.

(2) A Preferred Shares’ dividend coverage that is less than one time.

(3) Reliance on the manager to generate a high yield, through methods such as option writing, on the investment portfolio to meet distributions and other expenses without having to liquidate portfolio securities.

(4) The monthly cash distributions to holders of the Class A Shares which create grind on the Portfolio.

(5) The concentration of the Portfolio in one industry.

(6) The unhedged portion of the USD-denominated Portfolio that exposes the Portfolio to foreign currency
risk.

The affected issue is FTN.PR.A.

DBRS places emphasis on the grind in the portfolio due to the Capital Unit dividends, but the mitigating factor is that these dividends will be (and have been in the past) halted if the NAVPU falls below $15. It is not clear how much account has been taken of this. However, the 9.5% yield on the preferreds means that, as they say, the preferred share dividend coverage ratio is less than one time.

DBRS Limited (Morningstar DBRS) has announced that it:

changed the trend to Negative from Stable and confirmed the Issuer Rating and Senior Unsecured Debentures rating of Artis Real Estate Investment Trust (Artis or the REIT) at BBB (low) and its Preferred Trust Units rating at Pfd-3 (low).

KEY CREDIT RATING CONSIDERATIONS
The Negative trend reflects the sustained deterioration of EBITDA interest coverage beyond Morningstar DBRS’ prior year expectation of 2.7 times (x) or above because of the REIT’s high proportion of variable rate debt. Morningstar DBRS anticipates a modest improvement in the coverage in the medium term as the REIT continues to execute its Business Transformation Plan through monetizing assets and using the proceeds to repay further variable rate debt. However, Morningstar DBRS notes that, given the increased variable rate debt in an elevated interest rate environment and an already weakened coverage ratio, Artis has less cushion for the current leverage at the given rating level. Morningstar DBRS has also revised its assessment of the REIT’s portfolio size lower as the REIT continues to shrink in size following the asset dispositions carried out in the last 12 months ended (LTM) September 30, 2023. Morningstar DBRS believes that the weakening of the REIT’s financial risk metrics and declining market presence, coupled with its relatively smaller size for the current rating category, increase the possibility of a downgrade action in the near future.

CREDIT RATING DRIVERS
All else equal, Morningstar DBRS would consider downgrading Artis should it fail to achieve a Morningstar DBRS EBITDA interest coverage ratio of 1.83x or better on a sustained basis, or should the Morningstar DBRS total debt-to-EBITDA not improve to 8.6x or better on a sustained basis in the near term. Also, further negative rating actions could occur if the REIT’s debt maturity profile remains short on a sustained basis in the near term. Conversely, Morningstar DBRS would consider restoring a Stable trend should either of these metrics be comfortably achieved on a sustained basis, all else equal.

FINANCIAL OUTLOOK
Morningstar DBRS projects the Morningstar DBRS EBITDA interest coverage metrics to weaken and fluctuate in the 1.6x range by YE2023 and YE2024, primarily because of the REIT’s greater cost of debt as a result of its high variable debt exposure. The Morningstar DBRS debt-to-EBITDA is forecast to increase in the high 9x range at YE2023 because of the loss of EBITDA from recent asset sales carried out in 2023 before showing modest improvement to the high 8x range at YE2024. This improvement will be largely driven by the REIT’s asset monetization plans as demonstrated by the recent sale of its Calgary/Winnipeg Retail portfolio for aggregate proceeds of $222 million, which is expected to close in H1 2024. Morningstar DBRS understands the net disposition proceeds will be used to repay further debt. For comparative purposes, the REIT had Morningstar DBRS total debt-to-EBITDA and EBITDA interest coverage ratios of 9.2x and 1.84x, respectively, as of the LTM ended September 30, 2023.

CREDIT RATING RATIONALE
The rating confirmation is supported by (1) Artis’ well-diversified, albeit reduced, stable and recurrent income-producing portfolio through economic cycles; (2) strong tenant and property diversification; and (3) lack of aggressive expansion and development activities. The rating is constrained by (1) Artis’ weak interest coverage amid a high interest rate environment and elevated leverage for the REIT’s portfolio size and EBITDA; (2) lack of scale in any markets that it operates; and (3) the smaller portfolio size on both EBITDA and square footage bases relative to the BBB (low) rating category.

Affected issues are AX.PR.E AND AX.PR.I.

Pembina Pipeline Corporation has announced:

that it does not intend to exercise its right to redeem the currently outstanding Cumulative Redeemable Rate Reset Class A Preferred Shares, Series 3 (“Series 3 Shares”) (TSX: PPL.PR.C) on March 1, 2024.

As a result of the decision not to redeem the Series 3 Shares, and subject to certain terms of the Series 3 Shares, the holders of the Series 3 Shares will have the right to elect to convert all or part of their Series 3 Shares on a one-for-one basis into Cumulative Redeemable Floating Rate Class A Preferred Shares, Series 4 of Pembina (“Series 4 Shares”) on March 1, 2024 (the “Conversion Date”). Holders who do not exercise their right to convert their Series 3 Shares into Series 4 Shares will retain their Series 3 Shares.

As provided in the terms of the Series 3 Shares: (i) if Pembina determines that there would remain outstanding immediately following the conversion less than 1,000,000 Series 3 Shares, then all remaining Series 3 Shares will be automatically converted into Series 4 Shares on a one-for-one basis effective as of the Conversion Date; or (ii) if Pembina determines that there would be less than 1,000,000 Series 4 Shares outstanding immediately following the conversion, no Series 3 Shares will be converted into Series 4 Shares on the Conversion Date. There are currently 6,000,000 Series 3 Shares outstanding.

With respect to any Series 3 Shares that remain outstanding after the Conversion Date, holders thereof will be entitled to receive quarterly fixed cumulative preferential cash dividends, if, as and when declared by the Board of Directors of Pembina. The annual dividend rate for the Series 3 Shares for the five-year period from and including March 1, 2024, to, but excluding, March 1, 2029, will be 6.019 percent, being equal to the five-year Government of Canada bond yield of 3.419 percent determined as of today plus 2.60 percent, in accordance with the terms of the Series 3 Shares.

With respect to any Series 4 Shares that may be issued on the Conversion Date, holders thereof will be entitled to receive quarterly floating rate cumulative preferential cash dividends, if, as and when declared by the Board of Directors of Pembina. The annual dividend rate applicable to the Series 4 Shares for the three-month floating rate period from and including March 1, 2024, to, but excluding, June 1, 2024, will be 7.631 percent, being equal to the annual rate of interest for the most recent auction of 90-day Government of Canada treasury bills of 5.031 percent plus 2.60 percent, in accordance with the terms of the Series 4 Shares (the “Floating Quarterly Dividend Rate”). The Floating Quarterly Dividend Rate will be reset on the first day of March, June, September and December in each year.

Beneficial holders of Series 3 Shares who wish to exercise their right of conversion during the conversion period, which runs from January 31, 2024, until 3:00 pm (MT) / 5:00 pm (ET) on February 15, 2024, should communicate as soon as possible with their broker or other intermediary for more information. It is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary with the time to complete the necessary steps. Any notices received after this deadline will not be valid.

As previously announced, the dividend payable on March 1, 2024, to holders of the Series 3 Shares of record on February 1, 2024, will be $0.279875 per Series 3 Share. For more information on the terms of the Series 3 Shares and the Series 4 Shares, please see the prospectus supplement dated September 25, 2013, which can be found on SEDAR+ at www.sedarplus.ca.

PPL.PR.C was issued as a FixedReset, 4.70%+260, that commenced trading 2013-10-2 after being announced 2013-9-23. Notice of the reset to 4.478% was given 2019-1-30. I recommended against conversion and there was no conversion. The issue is tracked by HIMIPref™ but is relegated to the Scraps – FixedReset (Discount) subindex on credit concerns.

Thanks to Assiduous Reader avocado for bringing this to my attention!

Update, 2024-2-21: No conversion:

Pembina Pipeline Corporation (“Pembina”) (TSX: PPL; NYSE: PBA) announced today that none of Pembina’s Cumulative Redeemable Rate Reset Class A Preferred Shares, Series 3 (“Series 3 Shares”) (TSX: PPL.PR.C) will be converted into Cumulative Redeemable Floating Rate Class A Preferred Shares, Series 4 of Pembina (“Series 4 Shares”) on March 1, 2024.

After taking into account all the conversion notices received from holders of its outstanding Series 3 Shares by the February 15, 2024 deadline for the conversion of the Series 3 Shares into Series 4 Shares, less than the 1,000,000 Series 3 Shares required to give effect to conversions into Series 4 Shares were tendered for conversion.

Enbridge Inc. has announced:

that it does not intend to exercise its right to redeem its currently outstanding Cumulative Redeemable Preference Shares, Series P (Series P Shares) (TSX: ENB.PR.P) on March 1, 2024. As a result, subject to certain conditions, the holders of the Series P Shares have the right to convert all or part of their Series P Shares on a one-for-one basis into Cumulative Redeemable Preference Shares, Series Q of Enbridge (Series Q Shares) on March 1, 2024. Holders who do not exercise their right to convert their Series P Shares into Series Q Shares will retain their Series P Shares.

The foregoing conversion right is subject to the conditions that: (i) if Enbridge determines that there would be less than 1,000,000 Series P Shares outstanding after March 1, 2024, then all remaining Series P Shares will automatically be converted into Series Q Shares on a one-for-one basis on March 1, 2024; and (ii) alternatively, if Enbridge determines that there would be less than 1,000,000 Series Q Shares outstanding after March 1, 2024, no Series P Shares will be converted into Series Q Shares. There are currently 16,000,000 Series P Shares outstanding.

With respect to any Series P Shares that remain outstanding after March 1, 2024, holders thereof will be entitled to receive quarterly fixed cumulative preferential cash dividends, as and when declared by the Board of Directors of Enbridge. The new annual dividend rate applicable to the Series P Shares for the five-year period commencing on March 1, 2024 to, but excluding, March 1, 2029 will be 5.918 percent, being equal to the five-year Government of Canada bond yield of 3.418 percent determined as of today plus 2.50 percent in accordance with the terms of the Series P Shares.

With respect to any Series Q Shares that may be issued on March 1, 2024, holders thereof will be entitled to receive quarterly floating rate cumulative preferential cash dividends, as and when declared by the Board of Directors of Enbridge. The dividend rate applicable to the Series Q Shares for the three-month floating rate period commencing on March 1, 2024 to, but excluding, June 1, 2024 will be 1.89279 percent, based on the annual rate on three month Government of Canada treasury bills for the most recent treasury bills auction of 5.03 percent plus 2.50 percent in accordance with the terms of the Series Q Shares (the Floating Quarterly Dividend Rate). The Floating Quarterly Dividend Rate will be reset every quarter.

Beneficial holders of Series P Shares who wish to exercise their right of conversion during the conversion period, which runs from January 31, 2024 until 5:00 p.m. (EST) on February 15, 2024, should communicate as soon as possible with their broker or other intermediary for more information. It is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary time to complete the necessary steps. Any notices received after this deadline will not be valid.

ENB.PR.P was issued as a FixedReset, 4.00%+250, that commenced trading 2012-9-14 after being announced 2012-9-4. Notice of the reset to 4.379% was published 2019-1-30. I recommended against conversion and there was no conversion. It is tracked by HIMIPref™ but is relegated to the Scraps FixedReset Discount index on credit concerns.

Thanks to Assiduous Reader newbiepref for bringing this to my attention!

Update, 2024-2-28: No conversion:

Enbridge Inc. (TSX: ENB) (NYSE: ENB) (Enbridge) announced today that none of its outstanding Cumulative Redeemable Preference Shares, Series P (Series P Shares) will be converted into Cumulative Redeemable Preference Shares, Series Q (Series Q Shares) on March 1, 2024.

After taking into account all conversion notices received from holders of its outstanding Series P Shares by the February 15, 2024 deadline for the conversion of the Series P Shares into Series Q Shares, less than the 1,000,000 Series P Shares required to give effect to conversions into Series Q Shares were tendered for conversion.