BPO.PR.T Closes Firm on Good Volume

September 14th, 2012

Brookfield Office Properties has announced:

the completion of its previously announced Preferred Shares, Series T issue in the amount of C$250 million. The offering was underwritten by a syndicate led by CIBC, RBC Dominion Securities Inc., Scotia Capital Inc. and TD Securities Inc.

Brookfield Office Properties issued 10.0 million Preferred Shares, Series T at a price of C$25.00 per share yielding 4.60% per annum for the initial 6.25-year period ending December 31, 2018. Net proceeds from the issue will be added to the general funds of Brookfield Office Properties and be used to redeem its 8.0 million Preferred Shares, Series F and for general corporate purposes. Until such time as Brookfield Office Properties redeems the Preferred Shares, Series F, a portion of the net proceeds may temporarily be used to reduce short term borrowings.

The Preferred Shares, Series T will commence trading on the Toronto Stock Exchange on September 13, 2012 under the ticker symbol BPO.PR.T.

BPO.PR.T is a FixedReset, 4.60%+316, announced September 5. It will be tracked by HIMIPref™, but relegated to the Scraps index on credit concerns.

The issue traded 713,956 shares today in a range of 25.00-18 before closing at 25.10-12, 1×22. Vital statistics are:

BPO.PR.T FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-13
Maturity Price : 23.13
Evaluated at bid price : 25.10
Bid-YTW : 4.42 %

September 12, 2012

September 13th, 2012

The Great Regulatory Job Creation Scheme is gathering steam:

U.S. regulators are set to choose the first non-bank companies likely to be branded potential risks to the financial system, according to two people with knowledge of the plans.

The Financial Stability Oversight Council intends to request confidential data from as many as five U.S. firms at a meeting this month, said the people, who declined to be identified because the plans aren’t public. The request is a step toward deciding whether the companies should be subject to Federal Reserve supervision, including stress tests, higher capital levels and tougher liquidity requirements.

So the Fed will have to hire more regulators to administer the expanded mandate and then more regulators to replace the old regulators who have been hired by the affected companies at fat salaries. It’s win-win!

Wow! The US Mortgage almost-agencies have a radical new business model!

Edward J. DeMarco, the overseer of taxpayer-supported Fannie Mae (FNMA) and Freddie Mac, said the firms need to increase the fees they charge to guarantee mortgages in states where it’s costlier for them to deal with bad debt.

Can you imagine? Charging for services based on expected costs? I think Mr. DeMarco should get the Nobel Prize in Economics.

It was another day of little movement for the Canadian preferred share market, with PerpetualPremiums down 3bp, FixedResets gaining 4bp and DeemedRetractibles off 2bp. Volatility was minimal. Volume was average – which is a huge improvement from recent levels, probably helped along by the BAM.PF.B new issue.

PerpetualDiscounts (all three of them!) now yield 4.92%, equivalent to 6.40% interest at the standard equivalency factor of 1.3x. Update Long Corporates now yield about 4.4%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 200bp, sharply tighter than the 215bp reported September 5.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.1992 % 2,411.4
FixedFloater 4.52 % 3.87 % 35,092 17.52 1 0.0000 % 3,522.5
Floater 3.04 % 3.05 % 56,384 19.61 3 0.1992 % 2,603.6
OpRet 4.68 % 3.35 % 62,268 1.49 4 -0.2771 % 2,541.3
SplitShare 5.48 % 4.98 % 72,650 4.60 3 0.0400 % 2,800.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2771 % 2,323.8
Perpetual-Premium 5.29 % 3.10 % 85,844 0.34 28 -0.0340 % 2,278.7
Perpetual-Discount 4.95 % 4.92 % 95,267 15.65 3 0.0879 % 2,549.1
FixedReset 4.99 % 3.07 % 175,756 4.07 71 0.0411 % 2,422.9
Deemed-Retractible 4.95 % 3.54 % 120,696 1.85 46 -0.0152 % 2,365.3
Performance Highlights
Issue Index Change Notes
FTS.PR.E OpRet -1.05 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 26.36
Bid-YTW : 1.66 %
HSB.PR.D Deemed-Retractible 1.22 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-12-31
Maturity Price : 25.50
Evaluated at bid price : 25.63
Bid-YTW : 2.42 %
Volume Highlights
Issue Index Shares
Traded
Notes
BAM.PF.B FixedReset 332,922 New issue settled today.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-12
Maturity Price : 23.08
Evaluated at bid price : 24.96
Bid-YTW : 3.95 %
BNS.PR.Y FixedReset 158,162 Nesbitt crossed 136,600 at 25.20.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.19
Bid-YTW : 2.78 %
MFC.PR.B Deemed-Retractible 74,298 Nesbitt crossed 50,000 at 23.90.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.82
Bid-YTW : 5.31 %
HSB.PR.D Deemed-Retractible 66,701 RBC crossed 59,700 at 25.65.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-12-31
Maturity Price : 25.50
Evaluated at bid price : 25.63
Bid-YTW : 2.42 %
GWO.PR.J FixedReset 60,719 RBC crossed 59,700 at 26.12.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.10
Bid-YTW : 2.34 %
BNS.PR.K Deemed-Retractible 51,853 RBC crossed 50,000 at 25.70.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-04-28
Maturity Price : 25.25
Evaluated at bid price : 25.67
Bid-YTW : 3.01 %
There were 34 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
FTS.PR.E OpRet Quote: 26.36 – 26.80
Spot Rate : 0.4400
Average : 0.3055

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 26.36
Bid-YTW : 1.66 %

PWF.PR.O Perpetual-Premium Quote: 26.52 – 26.84
Spot Rate : 0.3200
Average : 0.1912

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-10-31
Maturity Price : 25.00
Evaluated at bid price : 26.52
Bid-YTW : 4.81 %

GWO.PR.M Deemed-Retractible Quote: 26.26 – 26.60
Spot Rate : 0.3400
Average : 0.2216

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-03-31
Maturity Price : 26.00
Evaluated at bid price : 26.26
Bid-YTW : 5.09 %

PWF.PR.K Perpetual-Premium Quote: 25.25 – 25.62
Spot Rate : 0.3700
Average : 0.2587

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.25
Bid-YTW : 4.77 %

MFC.PR.D FixedReset Quote: 26.41 – 26.63
Spot Rate : 0.2200
Average : 0.1324

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.41
Bid-YTW : 3.26 %

SLF.PR.E Deemed-Retractible Quote: 23.26 – 23.45
Spot Rate : 0.1900
Average : 0.1137

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.26
Bid-YTW : 5.46 %

BAM.PF.B Closes Firm on Good Volume

September 13th, 2012

Brookfield Asset Management has announced:

the completion of its previously announced Class A Preference Shares, Series 34 issue in the amount of CDN$250,000,000.

Brookfield issued 10,000,000 Series 34 Shares at a price of CDN$25.00 per share, for total gross proceeds of CDN$250,000,000. Holders of the Series 34 Shares will be entitled to receive a cumulative quarterly fixed dividend yielding 4.20% annually for the initial period ending March 31, 2019. Thereafter, the dividend rate will be reset every five years at a rate equal to the 5-year Government of Canada bond yield plus 2.63%. The Series 34 Shares will commence trading on the Toronto Stock Exchange this morning under the ticker symbol BAM.PF.B.

BAM.PF.B is a FixedReset, 4.20%+263, announced August 23. The issue traded 332,922 shares today in a range of 24.91-00 before closing at 24.96-00, 30×219. Vital Statistics are:

BAM.PF.B FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-12
Maturity Price : 23.08
Evaluated at bid price : 24.96
Bid-YTW : 3.95 %

DBRS Downgrades TCL to Pfd-3, Negative Trend

September 13th, 2012

DBRS has announced that it:

has today downgraded the Senior Unsecured Debt rating of Transcontinental Inc. (Transcontinental or the Company) to BBB from BBB (high) and its Preferred Shares rating to Pfd-3 from Pfd-3 (high). Both trends remain Negative, and the ratings are removed from Under Review. The downgrade reflects DBRS’s view that Transcontinental’s earnings profile has been structurally affected by a consumer shift to digital forms of media as the Company has struggled to sustain organic revenues and profitability. The Negative trend reflects DBRS’s view that weakening demand, combined with overcapacity, will continue to place pressure on the Company’s revenues, margins and cash flow generation going forward. DBRS’s concern is not based primarily on the Company’s debt level, as Transcontinental has remained prudent in terms of financial management, but rather the Company’s income and cash generating prospects.

If the Company’s plans and performance lead to signs of stabilization in organic revenue, and operating income over the near to medium term, the ratings outlook could stabilize. However, a continued and meaningful decline in organic revenue and operating income and/or key credit metrics over this period could result in a downgrade.

DBRS’ prior announcement of Review-Negative was reported on PrefBlog.

TCL is the issuer of TCL.PR.D, a FixedReset 6.75%+416, announced 2009-9-21. It is tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

September 11, 2012

September 12th, 2012

There’s a new wrinkle in the financial repression chronicles:

JPMorgan Chase & Co. (JPM) and Bank of America Corp. are helping clients find an extra $2.6 trillion to back derivatives trades amid signs that a shortage of quality collateral will erode efforts to safeguard the financial system.

Starting next year, new rules designed to prevent another meltdown will force traders to post U.S. Treasury bonds or other top-rated holdings to guarantee more of their bets. The change takes effect as the $10.8 trillion market for Treasuries is already stretched thin by banks rebuilding balance sheets and investors seeking safety, leaving fewer bonds available to backstop the $648 trillion derivatives market.

The solution: At least seven banks plan to let customers swap lower-rated securities that don’t meet standards in return for a loan of Treasuries or similar holdings that do qualify, a process dubbed “collateral transformation.” That’s raising concerns among investors, bank executives and academics that measures intended to avert risk are hiding it instead.

Adding to the concern is the reaction of central clearinghouses, which collect from losers on derivatives trades and pay off winners. Some have responded to the collateral shortage by lowering standards, with the Chicago Mercantile Exchange accepting bonds rated four levels above junk.

The potential reward for revenue-starved banks is an expanded securities-lending market that could generate billions of dollars in fees. JPMorgan and Bank of America, which have the biggest derivatives businesses among U.S. bank holding companies with a combined $140 trillion of the instruments, are already marketing their new collateral-transformation desks, people with knowledge of the operations said.

As discussed on August 31, directed lending to the government is a form of financial repression.

The US has to force people to buy its bonds! The outlook isn’t getting any better:

Moody’s warned Tuesday it could strip the United States of its coveted triple-A credit rating if Congress fails to produce a budget that will bring down the federal debt burden.

“Budget negotiations during the 2013 Congressional legislative session will likely determine the direction of the U.S. government’s Aaa rating and negative outlook,” the ratings firm said in a statement.

If the negotiations lead to specific policies that produce a stabilization and then downward trend in the ratio of federal debt to GDP over the medium term, the rating will likely be affirmed and the outlook returned to stable, it said.

“If those negotiations fail to produce such policies, however, Moody’s would expect to lower the rating, probably to Aa1.”

Moody’s said it was unlikely it would keep the Aaa rating with a negative outlook into 2014.

“The only scenario that would likely lead to its temporary maintenance would be if the method adopted to achieve debt stabilization involved a large, immediate fiscal shock – such as would occur if the so-called ‘fiscal cliff’ actually materialized – which could lead to instability,” it said.

There was very little movement in the Canadian preferred share market today, with PerpetualPremiums and FixedResets both gaining 3bp; DeemedRetractibles were off 2bp. Volatility was average. Volume improved a little, but was still below what I would call ‘average’ levels; but on a brighter note, RBC owned the board today, with no other dealer mentioned in the Volume Highlights.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.5726 % 2,406.6
FixedFloater 4.52 % 3.87 % 35,084 17.53 1 0.0952 % 3,522.5
Floater 3.02 % 3.07 % 55,251 19.46 3 -0.5726 % 2,598.5
OpRet 4.63 % 3.28 % 60,557 1.47 4 0.3644 % 2,548.4
SplitShare 5.48 % 5.07 % 75,233 4.60 3 -0.1065 % 2,799.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.3644 % 2,330.2
Perpetual-Premium 5.29 % 3.60 % 87,231 0.45 28 0.0271 % 2,279.5
Perpetual-Discount 4.91 % 4.94 % 95,317 15.48 3 0.4430 % 2,546.8
FixedReset 4.99 % 3.07 % 167,093 4.08 70 0.0266 % 2,421.9
Deemed-Retractible 4.95 % 3.68 % 121,414 1.85 46 -0.0187 % 2,365.7
Performance Highlights
Issue Index Change Notes
BAM.PR.M Perpetual-Discount 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-11
Maturity Price : 24.11
Evaluated at bid price : 24.40
Bid-YTW : 4.94 %
BAM.PR.Z FixedReset 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-11
Maturity Price : 23.35
Evaluated at bid price : 25.69
Bid-YTW : 4.26 %
FTS.PR.E OpRet 1.45 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 26.64
Bid-YTW : 0.16 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.D FixedReset 104,462 RBC crossed two blocks of 50,000 each, both at 26.65.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.63
Bid-YTW : 2.76 %
PWF.PR.M FixedReset 100,830 RBC crossed 100,000 at 26.25.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.23
Bid-YTW : 2.87 %
TRP.PR.B FixedReset 96,980 RBC crossed 70,000 at 24.90.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-11
Maturity Price : 23.38
Evaluated at bid price : 24.89
Bid-YTW : 2.69 %
SLF.PR.F FixedReset 54,565 RBC crossed 50,000 at 26.40.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-30
Maturity Price : 25.00
Evaluated at bid price : 26.39
Bid-YTW : 2.67 %
RY.PR.X FixedReset 53,635 RBC crossed 50,000 at 26.78.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-24
Maturity Price : 25.00
Evaluated at bid price : 26.75
Bid-YTW : 2.73 %
FTS.PR.H FixedReset 49,600 RBC crossed 48,700 at 25.50.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-11
Maturity Price : 23.59
Evaluated at bid price : 25.50
Bid-YTW : 2.78 %
There were 22 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.C Floater Quote: 17.15 – 17.50
Spot Rate : 0.3500
Average : 0.2483

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-11
Maturity Price : 17.15
Evaluated at bid price : 17.15
Bid-YTW : 3.09 %

BAM.PR.X FixedReset Quote: 25.02 – 25.20
Spot Rate : 0.1800
Average : 0.1164

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-11
Maturity Price : 23.18
Evaluated at bid price : 25.02
Bid-YTW : 3.41 %

SLF.PR.A Deemed-Retractible Quote: 24.10 – 24.28
Spot Rate : 0.1800
Average : 0.1199

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.10
Bid-YTW : 5.24 %

TRP.PR.A FixedReset Quote: 25.41 – 25.67
Spot Rate : 0.2600
Average : 0.2074

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-11
Maturity Price : 23.65
Evaluated at bid price : 25.41
Bid-YTW : 3.25 %

SLF.PR.B Deemed-Retractible Quote: 24.26 – 24.40
Spot Rate : 0.1400
Average : 0.0899

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.26
Bid-YTW : 5.20 %

CM.PR.L FixedReset Quote: 26.77 – 26.99
Spot Rate : 0.2200
Average : 0.1702

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.77
Bid-YTW : 2.53 %

BAF Downgraded to Pfd-3 by DBRS

September 12th, 2012

DBRS has announced that it:

has today downgraded Bell Aliant Regional Communications, Limited Partnership’s (Bell Aliant’s or the Company’s) Commercial Paper rating to R-2 (middle) from R-1 (low), Senior Unsecured Debt to BBB from BBB (high) and Preferred Shares to Pfd-3 from Pfd-3 (high), all with Stable trends. This action removes the ratings from Under Review with Negative Implications. This downgrade follows DBRS’s reassessment of the risks associated with the Company’s transformational strategy while the Stable trends reflect DBRS’s view that the Company’s fibre strategy presents a viable initiative with strong potential.

On August 2, 2012, DBRS noted that it recognizes the merits of Bell Aliant’s fibre expansion; however, it acknowledges that the transition will also not be without risk. In its review, DBRS focused on (1) Bell Aliant’s growth prospects within its new business lines; (2) the size and pace of the Company’s capital program and overall financing requirements, in light of management’s commitment to its dividend; and (3) the competitive environment, including pricing strategies and the threat of product innovation.

Although Bell Aliant continues to grow its fibre footprint and increase its IP subscriber base, the long-term effects of the rollout on consolidated revenue and EBITDA growth remain difficult to gauge. The Company’s FibreOP services are just beginning to generate positive EBITDA, while declining traditional local and long distance revenue still account for the majority of Bell Aliant’s current operating profits.

The Review Negative announcement was reported on PrefBlog.

The text of press release doesn’t mention their preferred share issuing arm, Bell Aliant Preferred Equity Inc., specifically, but its preferred shares are specifically placed under Review-Negative in the appended table.

Bell Aliant Preferred Equity Inc. has two issues outstanding: BAF.PR.A and BAF.PR.C. Both are FixedResets, both are relegated to the Scraps index on credit concerns.

New Issue: AX FixedReset 5.25%+446 US PAY

September 11th, 2012

Artis Real Estate Investment Trust (TSX: AX.UN) has announced:

a marketed public offering (the “Financing”) of approximately US$50 million Cumulative Rate Reset Preferred Trust Units, Series C (the “Series C Units”) at a price of US$25 per Series C Unit. The Financing is being led by RBC Capital Markets, CIBC and Macquarie Capital Markets Canada Ltd. (the “Underwriters”). Artis has also granted the Underwriters an over-allotment option, exercisable at any time up to 30 days after the closing of the Financing, to purchase additional Series C Units, up to an amount equal to 15% of the number of Series C Units sold pursuant to the Financing. The Financing will be priced in the context of the market with the final terms of the Financing to be determined at the time of pricing.

The Series C Units will pay fixed cumulative preferential distributions, payable on the last day of March, June, September and December of each year, as and when declared by the board of trustees of Artis, for the initial approximately five and a half-year period ending March 31, 2018. The first quarterly distribution, if declared, shall be payable on December 31, 2012. The distribution rate will be reset on March 31, 2018 and every five years thereafter at a rate equal to the sum of the then five-year United States Government bond yield and a spread which will be set upon pricing of this Financing. The Series C Units are redeemable by Artis, at its option, on March 31, 2018 and on March 31 of every fifth year thereafter.

Holders of Series C Units will have the right to reclassify all or any part of their Series C Units as Cumulative Floating Rate Preferred Trust Units, Series D (the “Series D Units”), subject to certain conditions, on March 31, 2018 and on March 31 of every fifth year thereafter. Such reclassification privilege may be subject to certain tax considerations (to be disclosed in the prospectus supplement). Holders of Series D Units will be entitled to receive a floating cumulative preferential distribution, payable on the last day of March, June, September and December of each year, as and when declared by the board of trustees of Artis, at a rate equal to the sum of the then 3-month United States Government Treasury Bill yield plus a spread which will be set upon pricing of this Financing.

The Financing is being made pursuant to the REIT’s base shelf prospectus dated June 15, 2012. The terms of the offering will be described in a prospectus supplement to be filed with Canadian securities regulators.

Artis intends to use the net proceeds from the Financing to repay indebtedness, fund future acquisitions, and for general trust purposes.

They also announced:

that is has priced its previously announced marketed public offering (the “Financing”) of Cumulative Rate Reset Preferred Trust Units, Series C (the “Series C Units”). Artis will issue 3.0 million Series C Units at a price of US$25 per Series C Unit for gross proceeds to Artis of US$75,000,000.

The Financing is being led by RBC Capital Markets, CIBC and Macquarie Capital Markets Canada Ltd. (the “Underwriters”).

The Series C Units will pay fixed cumulative preferential distributions of US$1.3125 per unit per annum, yielding 5.25% per annum, payable on the last day of March, June, September and December of each year, as and when declared by the board of trustees of Artis, for the initial approximately five and a half-year period ending March 31, 2018. The first quarterly distribution, if declared, shall be payable on December 31, 2012 and shall be US$0.3740 per unit, based on the anticipated closing of the offering of Series C Units of September 18, 2012. The distribution rate will be reset on March 31, 2018 and every five years thereafter at a rate equal to the sum of the then five year United States Government bond yield and 4.46%. The Series C Units are redeemable by Artis, at its option, on March 31, 2018 and on March 31 of every fifth year thereafter.

Holders of Series C Units will have the right to reclassify all or any part of their Series C Units as Cumulative Floating Rate Preferred Trust Units, Series D (the “Series D Units”), subject to certain conditions, on March 31, 2018 and on March 31 of every fifth year thereafter. Such reclassification privilege may be subject to certain tax considerations (to be disclosed in the prospectus supplement).

Holders of Series D Units will be entitled to receive a floating cumulative preferential distribution, payable on the last day of March, June, September and December of each year, as and when declared by the board of trustees of Artis, at a rate equal to the sum of the then 3-month United States Government Treasury Bill yield plus a spread of 4.46%.

The Financing is being made pursuant to the REIT’s base shelf prospectus dated June 15, 2012.

The terms of the offering will be described in a prospectus supplement to be filed with Canadian securities regulators. The Financing is expected to close on or about September 18, 2012 and is subject to regulatory approval.

Artis intends to use the net proceeds from the Financing to repay indebtedness, fund future acquisitions, and for general trust purposes.

It is my understanding that the shares are not rated and that there is no current intention to rectify this matter.

September 10, 2012

September 11th, 2012

There are rising expectations for low rates forever:

Just six months ago, money market traders expected the Federal Reserve to raise interest rates by the end of 2013. Now, they see borrowing costs staying at record lows for about three more years as the economic outlook worsens.

Bond market measures from overnight index swaps, which indicate no increase in the federal funds rate until mid-2015, to a 62 percent decline in a measure of volatility in government bonds signal that rates will stay near zero for longer. The gap between two- and five-year Treasury yields, which decreases when traders expect benchmark rates to remain subdued, is more than 50 percent narrower than its average since 2008.

It was an off day for the Canadian preferred share market, with PerpetualPremiums and FixedResets down 7bp, while DeemedRetractibles lost 9bp. Volatiltiy was average, all on the downside. Volume continued at holiday levels.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 0.6532 % 2,420.4
FixedFloater 4.52 % 3.88 % 35,161 17.52 1 -1.8692 % 3,519.1
Floater 3.01 % 3.06 % 52,909 19.51 3 0.6532 % 2,613.4
OpRet 4.65 % 3.20 % 59,626 0.78 4 -0.5531 % 2,539.1
SplitShare 5.47 % 4.89 % 74,124 4.61 3 -0.0665 % 2,802.6
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.5531 % 2,321.8
Perpetual-Premium 5.29 % 3.79 % 90,607 1.05 28 -0.0694 % 2,278.9
Perpetual-Discount 4.93 % 4.99 % 98,633 15.40 3 -0.0830 % 2,535.6
FixedReset 4.99 % 3.09 % 165,280 4.08 70 -0.0730 % 2,421.3
Deemed-Retractible 4.95 % 3.64 % 122,853 1.95 46 -0.0909 % 2,366.1
Performance Highlights
Issue Index Change Notes
FTS.PR.E OpRet -2.16 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 26.26
Bid-YTW : 2.19 %
BAM.PR.G FixedFloater -1.87 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-10
Maturity Price : 21.75
Evaluated at bid price : 21.00
Bid-YTW : 3.88 %
HSB.PR.D Deemed-Retractible -1.15 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.25
Evaluated at bid price : 25.70
Bid-YTW : 4.33 %
TRP.PR.A FixedReset -1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-10
Maturity Price : 23.69
Evaluated at bid price : 25.52
Bid-YTW : 3.22 %
Volume Highlights
Issue Index Shares
Traded
Notes
SLF.PR.B Deemed-Retractible 277,305 Nesbitt crossed blocks of 227,300 (nice ticket!) and 47,900, both at 24.40.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.39
Bid-YTW : 5.13 %
CIU.PR.B FixedReset 113,500 National crossed blocks of 82,000 and 26,700.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-01
Maturity Price : 25.00
Evaluated at bid price : 27.00
Bid-YTW : 2.08 %
PWF.PR.M FixedReset 62,000 TD crossed 62,000 at 26.25.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.05
Bid-YTW : 3.39 %
MFC.PR.B Deemed-Retractible 52,706 Nesbitt crossed 47,900 at 23.86.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.78
Bid-YTW : 5.33 %
MFC.PR.G FixedReset 42,829 RBC sold 13,200 to Nesbitt at 25.70, then crossed 15,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-12-19
Maturity Price : 25.00
Evaluated at bid price : 25.70
Bid-YTW : 3.68 %
MFC.PR.H FixedReset 37,900 RBC crossed 20,000 at 25.80.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.80
Bid-YTW : 3.82 %
There were 16 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.M Perpetual-Discount Quote: 24.15 – 24.50
Spot Rate : 0.3500
Average : 0.2175

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-10
Maturity Price : 23.87
Evaluated at bid price : 24.15
Bid-YTW : 4.99 %

HSB.PR.D Deemed-Retractible Quote: 25.70 – 26.11
Spot Rate : 0.4100
Average : 0.2800

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.25
Evaluated at bid price : 25.70
Bid-YTW : 4.33 %

IAG.PR.F Deemed-Retractible Quote: 26.07 – 26.49
Spot Rate : 0.4200
Average : 0.2910

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.07
Bid-YTW : 5.31 %

FTS.PR.E OpRet Quote: 26.26 – 26.59
Spot Rate : 0.3300
Average : 0.2108

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 26.26
Bid-YTW : 2.19 %

PWF.PR.M FixedReset Quote: 26.05 – 26.40
Spot Rate : 0.3500
Average : 0.2503

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.05
Bid-YTW : 3.39 %

IAG.PR.C FixedReset Quote: 25.86 – 26.23
Spot Rate : 0.3700
Average : 0.2893

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.86
Bid-YTW : 3.25 %

September 7, 2012

September 8th, 2012

US Payrolls weren’t very encouraging:

Payrolls rose less than projected in August and the unemployment rate was unexpectedly driven down by Americans leaving the labor force, boosting the odds of additional Federal Reserve easing to spur a faltering recovery.

The economy added 96,000 workers after a revised 141,000 increase in July that was smaller than initially estimated, Labor Department figures showed today in Washington. The median estimate of 92 economists surveyed by Bloomberg called for a gain of 130,000. The jobless rate fell to 8.1 percent.

European banks still aren’t doing very well:

ECB President Mario Draghi said yesterday the central bank will lend against assets in dollars, pounds and Japanese yen, as well as in euros, reopening a program that ran for two years following the September 2008 bankruptcy of the U.S. investment bank. The ECB also eased borrowing against government-issued or guaranteed assets by dropping rating requirements.

Investors’ reluctance to lend to banks in countries where bond yields soared has forced those banks to fund at the ECB. Spanish banks borrowed 375.5 billion euros ($476 billion) from the central bank as of the end of July, sucking collateral out of a government bond market that totals about 690 billion euros, according to data compiled by Bloomberg.

The ECB’s 1 trillion-euro longer-term refinancing operations in December and February took collateral out of the market, in particular in Spain and Italy, whose banks were the biggest borrowers. ECB bond buying as part of its new Outright Monetary Transactions program will pile more pressure onto a market that is already “highly illiquid,” said Chris Clark, a strategist at ICAP Plc, the largest broker of transactions between banks.

“There’s so little Spanish paper that hasn’t been lodged at the ECB that pretty much every single bond has gained a very significant premium to borrow,” he said. “If the ECB buys more bonds, it may dry up liquidity in the Spanish government bond market even more. These looser collateral rules will help.”

Apropos of which, Fitch Ratings has a most interesting report titled U.S. Money Fund Exposure and European Banks: Shift to Japan Continues:

U.S. prime money market funds (MMF) continued to increase their exposure to Japanese banks, which as of end-July represent 12.3% of total MMF holdings or a 118% increase on a dollar basis since end-May 2011 (see Shift to Japan Continues chart and Change in Exposure [on a Dollar Basis] table). This exposure exceeds aggregate MMF allocations to eurozone banks, which increased moderately since the prior reporting period and now constitute 8.5% of total MMF assets, still 76% below end-May 2011 levels on a dollar basis. This “disengagement” between MMFs and eurozone banks appears to be persisting, as MMF risk aversion continues and both eurozone banks and their regulators seem cautious towards this potentially volatile form of funding. Aggregate MMF allocations to European banks outside of the eurozone also grew with allocations to Nordic, Swiss, and U.K. banks all rising since end-June on a dollar basis. Outside of Europe, MMF allocations to Canadian banks declined slightly, while exposures to Australian banks remained constant over the same period. However, since end-January 2012, MMF exposures to Australian banks have declined by roughly 25%, consistent with efforts by these banks to gradually reduce their use of short-term wholesale funding. U.S. banks remain the largest single-country exposure at 12.4% of MMF assets as of end-July.

I am pleased to announce the existence of a prominent adult investor:

Mark Cuban, owner of the Dallas Mavericks basketball team, wrote a post on his blog in response to a column in which Andrew Ross Sorkin of the New York Times pinned the blame on David Ebersman, Facebook’s chief financial officer. Cuban said:

“I bought and sold FB shares as a TRADE, not an investment. I lost money. When the stock didn’t bounce as I thought/hoped it would, I realized I was wrong and got out. It wasn’t the fault of the FB CFO that I lost money. It was my fault. I know that no one sells me shares of stock because they expect the price of the stock to go up. So someone saw me coming and they sold me the stock. That is the way the stock market works. When you sit at the trading terminal you look for the sucker. When you don’t see one, it’s you. In this case it was me.”

Amazing, isn’t it?

There’s a (very US-centric) article on preferred shares in the Wall Street Journal, titled Playing ‘Preferred’ Shares.

DBRS confirmed MFC:

DBRS has today confirmed its ratings on Manulife Financial Corporation (Manulife or the Company) and its affiliates, including The Manufacturers Life Insurance Company, its primary operating company. The rating trend is Stable.

While DBRS is prepared to acknowledge that, barring a major economic crisis, the Company has probably hit its nadir, it does not believe that the lost profitability associated with the U.S. operation will recover quickly, especially since the former earnings levels benefited from favourable equity markets and a more favourable interest rate environment. DBRS is also mindful that the Company’s core earnings performance is dampened by hedging costs, reduced earnings opportunities related to potential recovery in capital markets, and more competitive market conditions. The Company has indicated that it also expects to take another material charge in Q3 2012 related to changes in actuarial assumptions driven by new standards of practice and the ambient macroeconomic environment, though much of this specific charge will relate to products and policy liabilities that are not part of the Company’s current growth plans. Other sources of potential earnings volatility relate to the indeterminate policyholder behaviours that are not addressed by current hedging activity, and a possible additional write down of goodwill reflecting the adverse interest rate environment.

At the Company’s current level of core earnings as DBRS defines them, fixed charge coverage ratios are below 5x with a core return on equity (ROE) of about 10%, well below the greater than 10x coverage and greater than 15% ROE reported prior to the onset of the 2008 financial crisis. Without the heft of the Company’s business franchises in Canada, Asia and the United States, such ratios and the accompanying earnings volatility would not be consistent with the DBRS quantitative criteria for Company’s rated at the current levels. Should these business franchises deteriorate, there could be negative rating implications.

To meet its regulatory capital requirements over the same period of market disruption, the Company has raised over $14 billion in net capital through market issues of common and preferred shares, reduced cash dividends and senior and subordinated debt issues. Correspondingly, the Company has consistently reported strong regulatory capital ratios, as its financial leverage ratios (total debt plus preferred as a proportion of capitalization) have increased to 32.2% from 17.1% in 2007, and remain above the Company’s 25% target. The Company reported an MCCSR ratio of 213% for the period ending June 30, 2012, which is among the strongest ratios in the industry and well above a reasonable minimum level, especially given the Company’s risk-mitigating hedges for which the regulatory ratio gives no credit. However, given the unstable economic environment regulatory uncertainty associated with Solvency II, IFRS accounting for Insurance Contracts and Employee Benefits and OSFI’s and the Canadian Institute of Actuaries requirements regarding required capital for variable annuity guarantees, DBRS feels that the relatively high regulatory capital ratios are prudent at this time.

DBRS also confirmed GWO:

DBRS has today confirmed the ratings of Great-West Lifeco Inc. (GWO or the Company) and its affiliated operating subsidiaries, including the Claims Paying Ratings at The Great-West Life Assurance Company, The Canada Life Assurance Company and London Life Insurance Company; all trends are Stable. The existing ratings for the Company and its operating subsidiaries reflect the continuing strong financial performance and the notable absence of earnings volatility associated with recent exogenous market factors. Stable earnings are a testament to the Company’s diversification by product and geography, as well as its conservatism with respect to embedded product risks, actuarial assumptions and asset quality.

Like its major peers, the Company is anchored by Canadian operations that benefit from an oligopolistic industry structure, which limits the worst of price competition.

The MCCSR ratio of the Company’s major regulated operating subsidiary has hovered just over 200% for the last two years. While this is lower than that of some major competitors, it reflects the Company’s lower-risk asset portfolio and insurance liabilities, and does not include $825 million of cash at the holding company that could easily be advanced to the regulated entities in the form of capital, if required. With longer experience as a shareholder-owned company, GWO has traditionally operated with higher financial leverage than most of its Canadian peers, a reflection of its debt-financed mergers and acquisitions activity and the historical attention paid to the efficient use of shareholder capital. At 32.2% at the end of June 2012, the Company’s total debt plus preferred has come into alignment with that of the peer group, as Great-West has reduced financial leverage and de-mutualized competitors have increased theirs. Fixed-charge coverage ratios at GWO nevertheless remain healthier than those of its peers, reflecting stronger profitability. The Company is actively retiring capital instruments issued at its operating companies in order to have a higher proportion of capital issuance at the holding company level, which will serve to reduce its double leverage ratio. In short, DBRS considers the Company’s financial leverage and capital position to be consistent with the current rating category, as long as it continues to operate conservatively.

As an integral component of Power Financial Corporation’s group of companies, GWO benefits from its parent’s financial support and its strong governance and risk management controls and procedures, which reinforce the conservative bottom-line focus of the Company.

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums gaining 6bp, FixedResets off 2bp and DeemedRetractibles up 4bp. Volatility was minimal. Volume remained at holiday levels.

HIMIPref™ Preferred Indices
These values reflect the December 2008 revision of the HIMIPref™ Indices

Values are provisional and are finalized monthly
Index Mean
Current
Yield
(at bid)
Median
YTW
Median
Average
Trading
Value
Median
Mod Dur
(YTW)
Issues Day’s Perf. Index Value
Ratchet 0.00 % 0.00 % 0 0.00 0 -0.0960 % 2,404.7
FixedFloater 4.44 % 3.80 % 32,635 17.70 1 0.0000 % 3,586.2
Floater 3.03 % 3.07 % 53,733 19.47 3 -0.0960 % 2,596.5
OpRet 4.62 % 3.00 % 36,315 0.77 4 0.0000 % 2,553.2
SplitShare 5.47 % 4.88 % 74,982 4.61 3 0.1465 % 2,804.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,334.7
Perpetual-Premium 5.29 % 3.43 % 89,921 0.46 28 0.0645 % 2,280.4
Perpetual-Discount 4.93 % 4.97 % 99,356 15.45 3 -0.1381 % 2,537.7
FixedReset 4.99 % 3.01 % 165,353 4.09 70 -0.0243 % 2,423.1
Deemed-Retractible 4.94 % 3.52 % 123,984 1.86 46 0.0357 % 2,368.3
Performance Highlights
Issue Index Change Notes
PWF.PR.K Perpetual-Premium 1.19 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.43
Bid-YTW : 4.38 %
Volume Highlights
Issue Index Shares
Traded
Notes
SLF.PR.B Deemed-Retractible 115,751 Nesbitt crossed 100,000 at 24.40.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.40
Bid-YTW : 5.12 %
BMO.PR.Q FixedReset 86,946 RBC crossed 65,000 at 25.45.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.45
Bid-YTW : 2.90 %
BNS.PR.Q FixedReset 43,151 Nesbitt crossed 25,000 at 25.42.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.42
Bid-YTW : 3.13 %
SLF.PR.D Deemed-Retractible 41,292 Nesbitt crossed 30,000 at 23.20.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.25
Bid-YTW : 5.40 %
RY.PR.I FixedReset 36,701 Nesbitt crossed 25,000 at 25.75.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.74
Bid-YTW : 3.07 %
ENB.PR.F FixedReset 31,019 RBC crossed 25,000 at 25.20.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-07
Maturity Price : 23.17
Evaluated at bid price : 25.15
Bid-YTW : 3.72 %
There were 14 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
MFC.PR.H FixedReset Quote: 25.64 – 25.99
Spot Rate : 0.3500
Average : 0.2303

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.64
Bid-YTW : 3.96 %

HSB.PR.C Deemed-Retractible Quote: 25.84 – 26.14
Spot Rate : 0.3000
Average : 0.2163

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-10-07
Maturity Price : 25.50
Evaluated at bid price : 25.84
Bid-YTW : 0.15 %

GWO.PR.I Deemed-Retractible Quote: 23.70 – 23.96
Spot Rate : 0.2600
Average : 0.1825

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.70
Bid-YTW : 5.20 %

POW.PR.D Perpetual-Premium Quote: 25.30 – 25.49
Spot Rate : 0.1900
Average : 0.1201

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : 4.80 %

BAM.PR.Z FixedReset Quote: 25.61 – 25.89
Spot Rate : 0.2800
Average : 0.2141

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-09-07
Maturity Price : 23.33
Evaluated at bid price : 25.61
Bid-YTW : 4.23 %

BAM.PR.P FixedReset Quote: 26.86 – 27.09
Spot Rate : 0.2300
Average : 0.1647

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-30
Maturity Price : 25.00
Evaluated at bid price : 26.86
Bid-YTW : 3.92 %

DBRS Reviews 13 Split Shares

September 8th, 2012

DBRS has announced that it:

has today taken a range of rating actions on 13 structured preferred shares issued by 12 split share companies and trusts (collectively, the Issuers).

DBRS Review Announced 2012-9-7
Ticker Old
Rating
Asset
Coverage
Last
PrefBlog
Post
HIMIPref™
Index
New
Rating
CGI.PR.B Pfd-1(low) 3.9-:1
2012-6-30
Capital Unit Dividend Worries Scraps Pfd-1(low)
CGI.PR.C Pfd-1(low) 3.9-:1
2012-6-30
Capital Unit Dividend Worries Scraps Pfd-1(low)
NEW.PR.C Pfd-2 3.4-:1
2012-9-6
Partial Redemption Scraps Pfd-2(high)
CBU.PR.A Pfd-2 3.7-:1
2012-9-6
Normal Course Issuer Bid Not tracked Pfd-2
BBO.PR.A Pfd-2(low) 2.0+:1
2012-9-7
Gets Bigger Not tracked Pfd-2 [Review Negative]
BSC.PR.B Pfd-2(low) 2.5+:1
2012-9-6
Partial Call for Redemption Scraps Pfd-2(low)
SBC.PR.A Pfd-3(high) 2.1+:1
2012-9-6
Annual Report Scraps Pfd-3(high)
BK.PR.A Pfd-3(high) 1.9+:1
2012-8-31
Annual Report Scraps Pfd-3
DFN.PR.A Pfd-3(high) 1.8+:1
2012-8-31
Annual Report Scraps Pfd-3
SBN.PR.A Pfd-3 1.8-:1
2012-9-6
Annual Report Scraps Pfd-3
DF.PR.A Pfd-3 1.5+:1
2012-8-31
Annual Report Scraps Pfd-3(low)
FCS.PR.B Pfd-3(low) 1.4+:1
2011-12-31
1.4-:1
2012-9-6
(My calculation)
Warrant Offering Scraps Pfd-3(low)
LBS.PR.A Pfd-3 1.5+:1
2012-9-6
Annual Report Scraps Pfd-3(low)