Archive for the ‘Better Communication, Please!’ Category

New Issue: PVS Split Share, 4.90%, 7-year

Thursday, November 15th, 2018

It is my understanding that:

Partners Value Split Corp. has entered into an agreement to sell six million Class AA preferred shares Series 9 to a syndicate of underwriters led by Scotiabank, BMO Capital Markets , CIBC Capital Markets , RBC Capital Markets and TD Securities Inc. on a bought deal basis.

The Series 9 Preferred Shares will be issued at a price of $25.00 per share, for gross proceeds of $150,000,000 . The Series 9 Preferred Shares will carry a fixed coupon of 4.90% and will have a final maturity of February 28, 2026 . The Series 9 Preferred Shares have a provisional rating of Pfd-2 (low) from DBRS. The net proceeds of the offering will be used to redeem the Company’s outstanding Class AA preferred shares Series 3.

The Company has granted the underwriters an option, exercisable in whole or in part prior to closing, to purchase up to an additional 2,000,000 Series 9 Preferred Shares at the same offering price, which, if exercised, would increase the gross offering size to $200,000,000 . Closing of the offering is expected to occur on or about November 26, 2018.

Adil Mawani , Chief Financial Officer, will be available at (647) 503-6513 to answer any questions regarding the offering.

In line with the company’s usual contempt for the investors who provide it with capital, there is no press release published on the company’s web-page, nor is there any information available on Marketwired, where they have previously grudgingly published announcements, so it doesn’t appear that Adil Mawani has any greater desire to do a competent job than any of the other clowns at PVS. Feel free to call him and ask if the company will ever do something right.

Amazingly, there’s an actual term-sheet on SEDAR, searchable (but the regulators will get very upset if you link to it) with the description “Partners Value Split Corp. Nov 15 2018 13:29:09 ET Marketing materials – English PDF 16 K”.

There is also a provisional rating announcement from DBRS:

DBRS Limited (DBRS) assigned a provisional rating of Pfd-2 (low) to the Class AA Preferred Shares, Series 9 (the Series 9 Preferred Shares) to be issued by Partners Value Split Corp. (the Company) that will rank pari passu with the existing Class AA Preferred Shares, Series 3 (the Series 3 Preferred Shares); the Class AA Preferred Shares, Series 6 (the Series 6 Preferred Shares); the Class AA Preferred Shares, Series 7 (the Series 7 Preferred Shares); and the Class AA Preferred Shares, Series 8 (the Series 8 Preferred Shares; collectively, the Class AA Preferred Shares).

Proceeds from the Series 9 Preferred Share offering will be used to fund the redemption of the Series 3 Preferred Shares no later than their scheduled maturity date of January 10, 2019. The Series 9 Preferred Shares will be entitled to fixed quarterly cumulative preferential dividends on the expected issue price of $25.00. The maturity date for the Series 9 Preferred Shares is set to February 28, 2026.

The Company owns a portfolio (the Portfolio) of Class A Limited Voting Shares (the BAM Shares) of Brookfield Asset Management Inc. (BAM; rated A (low) with a Stable trend by DBRS). Dividends received from the Portfolio are used to fund the payment of interest on the Debentures to the extent that any have been issued and to fund the payment of dividends on the Class AA Preferred Shares. There were 700 Debentures issued on November 9, 2018, as a result of the retraction of 700 Series 8 Preferred Shares.

Holders of the Junior Preferred Shares, Series 1 (the Junior Preferred Shares) are entitled to receive quarterly noncumulative cash distributions at an annual rate of 5% when declared by the board of directors. There is $200 million worth of Junior Preferred Shares currently outstanding. Holders of the Capital Shares of the Company will only receive excess dividend income after interest on the Debentures, Class AA Preferred Share distributions, Junior Preferred Share Distributions and other Company expenses have been paid. Any capital appreciation of the BAM Shares will benefit the holders of the Capital Shares. All series of Class AA Preferred Shares rank senior to the Capital Shares, the Class AAA Preferred Shares and the Junior Preferred Shares and on a pari passu basis with all other Class AA Preferred Shares with respect to payment of dividends and repayment of principal.

The Company has issued a limited number of Class A Voting Shares that rank senior to the Class AA Preferred Shares in respect of capital upon the dissolution, winding up or insolvency of the Company. As of June 30, 2018, there were $100 worth of such shares outstanding.

Following the redemption of the Series 3 Preferred Shares, the downside protection available to the Class AA Preferred Shares is expected to be approximately 85% (based on the closing price of BAM shares as of October 29, 2018) and the dividend coverage ratio is expected to be approximately 2.0 times (x; based on the Canadian dollar and U.S. dollar exchange rate as of October 29, 2018). BAM declares its dividends in U.S. dollars; consequently, there is the risk that an appreciating Canadian dollar will cause the dividend coverage ratio to fall below 1.0x. In the event of a shortfall, the Company may sell some of the BAM Shares, engage in security lending or write covered call options to generate sufficient income to satisfy its obligations to pay the Class AA Preferred Shares dividends. If the Company chooses to lend its holdings, the Portfolio would be exposed to the potential losses in the event that the borrower defaults on its obligations to return the borrowed securities.

The main constraints to the ratings are the following:

(1) The downside protection available to holders of the Class AA Preferred Shares depends solely on the market value of the BAM Shares held in the Portfolio, which will fluctuate over time.

(2) There is a lack of diversification, as the Portfolio is entirely made up of BAM Shares.

(3) Changes in the dividend policy of BAM may result in reductions in Class AA Preferred Shares dividend coverage.

(4) As BAM declares dividends in U.S. dollars, the Company is exposed to foreign currency risk relating to the Canadian-U.S. exchange rate, specifically the appreciation of the Canadian dollar versus the U.S. dollar. This may have a negative impact on the dividend coverage ratio of the Class AA Preferred Shares, as these dividends are paid in Canadian dollars.

(5) Downside protection available to the Class AA Preferred Shares may be negatively affected by the retraction of the Junior Preferred Shares.

PVS.PR.F Soft on Modest Volume

Monday, September 18th, 2017

Partners Value Split Corp. has announced (although not yet on their website; maybe not ever on their website, since the lazy turds haven’t even published the new issue announcement yet):

the completion of its previously announced issue of 6,000,000 Class AA Preferred Shares, Series 8 (the “Series 8 Preferred Shares”) at an offering price of $25.00 per Series 8 Preferred Share, raising gross proceeds of $150,000,000. The Series 8 Preferred Shares carry quarterly fixed cumulative preferential dividends representing a 4.80% annualized yield on the offering price and have a final maturity of September 30, 2024. The Series 8 Preferred Shares have been listed and posted for trading on the Toronto Stock Exchange under the symbol PVS.PR.F. The net proceeds of the offering will be used to redeem the Company’s outstanding Class AA Preferred Shares, Series 5 (the “Series 5 Preferred Shares”) on December 10, 2017 in accordance with the terms of the Series 5 Preferred Shares and to pay a special dividend to holders of the Company’s capital shares.

Prior to the closing of the offering, the Company subdivided the existing capital shares held by Partners Value Investments Inc. so that there are an equal number of preferred shares and capital shares outstanding.

The Company owns a portfolio consisting of 79,740,966 Class A Limited Voting Shares of Brookfield Asset Management Inc. (the “Brookfield Shares”) which is expected to yield quarterly dividends that are sufficient to fund quarterly fixed cumulative preferential dividends for the holders of the Company’s preferred shares and to enable the holders of the Company’s capital shares to participate in any capital appreciation of the Brookfield Shares. Brookfield Asset Management Inc. is a global alternative asset manager with over US$250 billion in assets under management. For more than 100 years Brookfield has owned and operated assets on behalf of shareholders and clients with a focus on property, renewable energy, infrastructure and private equity. Brookfield has a range of public and private investment products and services which leverage its expertise and experience. Brookfield Shares are co-listed on the New York Stock Exchange under the symbol “BAM”, the TSX under the symbol “BAM.A” and the NYSE Euronext under the symbol “BAMA”.

David Clare, Vice President, will be available at (647) 503-6516 to answer any questions regarding the offering.

PVS.PR.F is a SplitShare, 4.80%, maturing 2024-9-30, announced 2017-09-07. It will be tracked by HIMIPref™ and has been assigned to the SplitShare subindex.

The issue traded 234,295 shares today in a range of 24.79-98 before closing at 24.93-94. Vital statistics are:

PVS.PR.F SplitShare YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2024-09-30
Maturity Price : 25.00
Evaluated at bid price : 24.93
Bid-YTW : 4.86 %

The issue’s rating has been finalized at Pfd-2(low) by DBRS:

DBRS Limited (DBRS) assigned a new rating of Pfd-2 (low) to the Class AA Preferred Shares, Series 8 (the Series 8 Preferred Shares) to be issued by Partners Value Split Corp. (the Company) and confirmed the ratings of the previously issued Class AA Preferred Shares, Series 3 (the Series 3 Preferred Shares); Class AA Preferred Shares, Series 5 (the Series 5 Preferred Shares); Class AA Preferred Shares, Series 6 (the Series 6 Preferred Shares); Class AA Preferred Shares, Series 7 (the Series 7 Preferred Shares; collectively, the Class AA Preferred Shares) at Pfd-2 (low).

Proceeds from the Series 8 Preferred Share offering will be used to fund the redemptions of the previously issued Series 5 Preferred Shares no later than their scheduled maturity date of December 10, 2017. To the extent that net proceeds from the offering exceed funding requirements associated with the redemptions, the Company will distribute such net proceeds to holders of the Capital Shares as a special dividend.

BBD.PR.B / BBD.PR.D : 32% Net Conversion to FixedFloater

Sunday, August 13th, 2017

Bombardier has made no explicit announcement regarding the results of the interconversion privilege between BBD.PR.B AND BBD.PR.D, possibly because doing so would require a fat government subsidy. However, we can determine what happened by comparing the figures disclosed in their 17Q2 report (or the 2016 Annual Report) with the “Shares Out” field published on the TMX website for BBD.PR.B and BBD.PR.D.

Calculation of Net Conversion
  BBD.PR.B BBD.PR.D
Shares Out Prior
(per 17Q2 report)
9,692,521 2,307,479
Shares Out Now
(per TMX)
5,811,736 6,188,264

Thus we see that there has been a net conversion of 3,880,785 shares from BBD.PR.B (the RatchetRate issue) to BBD.PR.D (the FixedFloater issue), which represents 32% of the total float.

It is also of interest to note that there is nothing on the Bombardier website or on SEDAR regarding the numbers of shares currently outstanding, or regarding the results of the conversion privilege, but the bank-dominated Toronto Stock Exchange knows all about it! This is similar to the selective disclosure noted with respect to the IAG.PR.G conversion results that the regulators are supposed to be so concerned about; but as long as their very important buddies and future employers at the banks are advised, it seems they feel actual investors can go to hell.

Assiduous Readers will recall that in my terminology, BBD.PR.B is a Ratchet Rate preferred, currently paying 100% of Prime, reset quarterly. BBD.PR.D is a FixedFloater which will now pay $0.99575 p.a., or 3.983% of its $25 par value. The latter rate resets every Exchange Date; the next exchange date will be 2022-8-1. Both issues have been relegated to the Scraps subindex since inception on credit concerns.

I previously made no recommendation regarding conversion, on the grounds that the issues were expected to trade at approximately the same price and that investors should choose the alternative best suited for their individual circumstances. The market has decided to make me look like an idiot, with BBD.PR.B being quoted at 10.21-42 and BBD.PR.D at 11.10-28 as of August 11, resulting in a break-even prime rate of 2.95% over the next five years; but we’ll see how long that lasts. It’s the lowest of all the FixedFloater / RatchetRate pairs at the moment:

pairs_ff_170811
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IAG.PR.G : No Conversion to FloatingReset

Thursday, June 29th, 2017

Industrial Alliance Insurance and Financial Services Inc. has disclosed in an eMail response to my nine (count ’em, nine) inquiries:

Per our May 31 press release, since there were less than 1,000,000 shares to be converted into Series H, no Series H shares will be issued and all shares will remain in Series G, returning a 3.777% dividend rate.

We decided not to issue a press release. We informed CDS last week and the result should have been communicated through CDS. We certainly take note of your comment regarding peers issuing press release in that situation.

Please let me know if you have any questions.

Best regards,

This is pretty second-rate shareholder communication, although I have no doubt that it is legal. CDS? The company is relying on CDS, a bank-owned monopoly with basically no mandate or incentive to communicate with shareholders and entrusting it with the responsibility to promulgate corporate information? The idea is ridiculous.

We can look, for instance, at the SEC’s 2013 announcement regarding disclosures via Twitter (emphasis added):

The Securities and Exchange Commission today issued a report that makes clear that companies can use social media outlets like Facebook and Twitter to announce key information in compliance with Regulation Fair Disclosure (Regulation FD) so long as investors have been alerted about which social media will be used to disseminate such information.

The SEC’s report of investigation confirms that Regulation FD applies to social media and other emerging means of communication used by public companies the same way it applies to company websites. The SEC issued guidance in 2008 clarifying that websites can serve as an effective means for disseminating information to investors if they’ve been made aware that’s where to look for it. Today’s report clarifies that company communications made through social media channels could constitute selective disclosures and, therefore, require careful Regulation FD analysis.

“One set of shareholders should not be able to get a jump on other shareholders just because the company is selectively disclosing important information,” said George Canellos, Acting Director of the SEC’s Division of Enforcement. “Most social media are perfectly suitable methods for communicating with investors, but not if the access is restricted or if investors don’t know that’s where they need to turn to get the latest news.”

The fact that material disclosures of this nature can be made selectively to broker-members of CDS is a disgrace and is particularly obnoxious in that CDS’s immediate controller, the bank-owned Toronto Stock Exchange, has not publicized this information on their website listing for IAG.PR.G or, indeed, for IAG common. However, given that this selective disclosure favours the Big Banks, I’m not holding my breath while waiting for regulatory action.

Assiduous Readers will recall that IAG.PR.G will reset at 3.777% and should now be referred to as a FixedReset, 3.777%+285. I recommended against conversion.

IAG.PR.G commenced trading 2012-6-1 (and was, unusually, re-opened on 2012-6-19) after being announced 2012-5-24. It has been a member of the FixedReset subindex since inception.

As this issue is not NVCC compliant, it is analyzed as having a Deemed Retraction.

Update, 2017-6-30 : The eMail quoted above was from the company and received 2017-06-28. The following was received from the always efficient Computershare on 2017-06-30 (they got the same inquiries I sent to the company itself):

Thank you for your inquiry.

We confirm that Industrial Alliance announced on June 1st, 2017 the conversion of the Class A preferred shares series G (CUSIP 455871806) for preferred series H shares (CUSIP 455871889). However, since less than 1,000,000 series G shares were deposited no shares will be converted. Shareholders will continue to hold their series G shares. Industrial Alliance gave written notice to this effect to holders of series G shares on or around June 22nd, 2017.

If you have any questions, please do not hesitate to contact our National Customer Contact Centre at 888-838-1405 (outside North America at 514-982-7555) between 8:30am and 8:00pm EST from Monday to Friday and one of our agents will be pleased to assist you with your inquiry.

Note that the phrase “gave written notice to this effect to holders” is a very, very clever phrase that some people consider ethical: since IAG.PR.G is book-based, there is (in a very, very clever, lawyerly sense) exactly one holder – CDS. So hats off to the very, very clever people at Computershare!

Yours Sincerely,

ENB.PR.B : 8% Conversion To FloatingResets

Thursday, May 25th, 2017

In keeping with its policy of contempt for the preferred shareholders who provide a chunk of its financing, Enbridge has again decided not to publicize events related to its ENB.PR.B issue, its extension, reset and conversion privilege.

Assiduous Readers will recall that ENB.PR.B will reset to 3.415% effective 2017-6-1. It was issued as a 4.00%+240 FixedReset which commenced trading 2011-9-30 after being announced 2011-9-21.

An inquiry to Enbridge Investor Relations elicited the response:

Approximately 1.7 million Series B will be converted into Cs and those Cs will start to trade on the TSX on June 1.

It will be remembered that I recommended against conversion.

Market conditions with respect to FixedReset / FloatingReset equivalency have not changed significantly since my recommendation:

pairs_fr_170525
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ENB.PR.B To Reset At 3.415%

Friday, May 12th, 2017

Due to total lack of communication from Enbridge, it was necessary for me to write an eMail:

Subject: ENB.PR.B

I understand that this issue will reset on June 1, 2017.

What will be the dividend reset rate? Where may I find a copy of the news release?

Sincerely,

Enbridge’s Investor Relations department replied (emphasis added):

Thank you for your email and interest in Enbridge.

We are rolling both the Series B (ENB.PR.B) and Series J (ENB.PR.U) preferred shares.

The deadline for the registered shareholder, CDS & Co., to provide notice of exercise of the right to convert Series B Preference Shares into Series C Preference Shares is 5:00 p.m. (Toronto time) on May 17, 2017.
The annual dividend rate applicable to the Series B (ENB.PR.B) Preference Shares for the five-year period from and including June 1, 2017 to but excluding June 1, 2022 will be 3.415%, being equal to the 5-year Government of Canada bond yield determined as of May 2, 2017, plus 2.40%, as determined in accordance with the terms of the Series B Preference Shares.

The dividend rate applicable to the Series C Preference Shares for the 3-month floating rate period from and including June 1, 2017 to but excluding September 1, 2017 will be 0.744% (2.950% on an annualized basis), being equal to the sum of the three month Government of Canada treasury bills, plus 2.40%, on an actual/366 day count basis, as determined in accordance with the terms of the Series C Preference Shares (the “Floating Quarterly Dividend Rate”). The Floating Quarterly Dividend Rate will be reset every quarter and registered holders will be provided with notice thereof.

The deadline for the registered shareholder, CDS & Co., to provide notice of exercise of the right to convert Series J Preference Shares into Series K Preference Shares is 5:00 p.m. (Toronto time) on May 17, 2017.

The annual dividend rate applicable to the Series J Preference Shares (ENB.PR.U) for the five-year period from and including June 1, 2017 to but excluding June 1, 2022 will be 4.887%, being equal to the 5-year United States treasury bond yield determined as of May 2, 2017, plus 3.05%, as determined in accordance with the terms of the Series J Preference Shares.

The dividend rate applicable to the Series K Preference Shares for the 3-month floating rate period from and including June 1, 2017 to but excluding September 1, 2017 will be 0.978% (3.880% on an annualized basis), being equal to the sum of the three month United States Government treasury bills, plus 3.05%, on an actual/366 day count basis, as determined in accordance with the terms of the Series K Preference Shares (the “Floating Quarterly Dividend Rate”). The Floating Quarterly Dividend Rate will be reset every quarter and registered holders will be provided with notice thereof.

On May 4th, 2017 a notification was sent out by the CDS (Clearing and Depository Services Inc.) to brokerage firms for both the Series B (ENB.PR.B) and Series J (ENB.PR.U) via email, bulletin link or swift notification which outlined the reset terms of these preferred series.

Under the terms of the prospectus, we fulfilled our obligation to notify CDS at which point the information is distributed to participants. The CDS notification included the fixed and floating reset rates.

Kind Regards,

Note that the deadline to advise the company if you wish to convert holdings of ENB.PR.B is 5:00 p.m. (Toronto time) on May 17, 2017..

I will have post a recommendation regarding such a conversion on Friday May 12.

I consider it an absolute disgrace that Enbridge holds its preferred shareholders in such disdain that it refuses to issue a press release to advise them of the rate and deadlines. Virtually every other company with FixedResets outstanding does so as a matter of course.

FFH.PR.K : No Conversion to FloatingReset

Tuesday, April 4th, 2017

Fairfax could not be bothered to issue a press release to let its financers know what’s going on, but today I contacted their investor relations department and spoke to a man whose ghastly job is to speak to people like me.

Insufficient shares were tendered to allow the conversion to proceed, but the precise number tendered is some kind of Top Secret corporate intelligence. If the Russians were to be found out – or the Chinese! – the pillars of western capitalism would be imperilled.

Assiduous Readers will remember that I recommended against conversion after the reset to 4.671% for FFH.PR.K.

So FFH.PR.K is now a FixedReset, 4.671%+351. It is tracked by HIMIPref™ but is relegated to the Scraps sub-index on credit concerns.

BPO Has A Website!

Wednesday, March 1st, 2017

I have complained a few times recently (for instance, here and here) about the lack of internet presence of Brookfield Office Properties Inc., a subsidiary of Brookfield Property Partners L.P.; today, I actually did something about it and contacted Matthew Cherry, their Vice President, Investor Relations and Communications, asking about the location of their press releases.

He was kind enough to refer me to the proper page on http://www.bpoinvestor.com.

Great! So now we can look up press releases for BPO, as long as we remember the name of their website! The next step is to convince Brookfield to put links to this site on Brookfield.com in some kind of logical manner and then we’ll be cooking with gas!

BPO has the following preferred share issues outstanding: BPO.PR.A, BPO.PR.C, BPO.PR.E, BPO.PR.J, BPO.PR.K, BPO.PR.N, BPO.PR.P, BPO.PR.R, BPO.PR.S, BPO.PR.T, BPO.PR.W, BPO.PR.X and BPO.PR.Y.

FFH.PR.H Listed: 26% Conversion

Thursday, October 1st, 2015

Fairfax Financial Holdings Limited has announced:

 

That’s right, nothing regarding the conversion and listing of FFH.PR.H, which is the same stunt they pulled when FFH.PR.F was listed.

So, I am left to report that FFH.PR.G is a FixedReset, currently 3.318%+256. Its Strong Pair is FFH.PR.H, a FloatingReset paying three month bills +256bp, reset quarterly. Both issues will be tracked by HIMIPref™, both relegated to the Scraps index on credit concerns.

The Toronto Stock Exchange reports that there are 2,567,048 shares of FFH.PR.H outstanding and 7,432,952 of FFH.PR.G; since there were 10-million shares of FFH.PR.G originally issued, we can say that the conversion rate was 26% after my recommendation not to convert.

Vital statistics are:

FFH.PR.G FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-30
Maturity Price : 13.74
Evaluated at bid price : 13.74
Bid-YTW : 6.11 %
FFH.PR.H FloatingReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2045-09-30
Maturity Price : 13.70
Evaluated at bid price : 13.70
Bid-YTW : 5.42 %

No shares of FFH.PR.H traded today (consolidated exchanges) and the closing quote was 13.70-23.00, so nothing about the pricing can be taken too seriously! However:

pairs_FR_150930
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The FFH.PR.G / FFH.PR.H pair implies an average three month bill rate over the next five years of +1.03%, so far above the average it is off the charts.

ALA.PR.A To Reset At 3.38%

Thursday, September 3rd, 2015

I have learned that ALA.PR.A will reset at 3.38%.

ALA.PR.A is a FixedReset with a spread of 266bp over five-year Canadas, which commenced trading August 19, 2010 after being announced August 10, 2010. The original coupon was 5.00%, so the reset rate of 3.38% represents a decline of 32%. Hey, by recent 40%+ standards, that looks good!

Holders have the option to convert into a FloatingReset, and this option must be exercised prior to 5pm, September 15 before vanishing until the next reset date in 2020. Recent market conditions have been highly unfavourable for FloatingResets and it is likely that I will recommend against conversion. However, conditions can change dramatically and rapidly and I will wait until September 10 to make a more formal recommendation.

Note that the September 15 notification date is for notification of the company, and brokers will generally have an internal deadline a day or two prior to this … so if you’re planning to wait until the last minute, contact your broker and find out precisely when the last minute will be!

I complained yesterday about the lack of information made available by the company and sent them an eMail. AltaGas’ Investor Relations department refused to answer my question directly and instead gave me contact information for a third party not employed by AltaGas, expressing the pious hope that he “may be able to assist.”

AltaGas’ Investor Relations department must be the most totally useless public company department on earth.