TCL.PR.D Upgraded to P-3(high) by S&P

December 21st, 2010

Standard & Poors has announced:

it raised its long-term corporate credit rating on Montreal-based Transcontinental Inc. to ‘BBB’ from ‘BBB-‘. The outlook is stable.

“The upgrade reflects our expectation of the continued improvement in Transcontinental’s financial risk profile stemming from lower debt levels, increased profitability, and significant financial flexibility due to management’s focus on streamlining the business and cutting costs,” said Standard & Poor’s credit analyst Lori Harris. “These actions have resulted in a material strengthening of credit protection measures, with our expectation that Transcontinental will maintain an adjusted debt to EBITDA in the 2x area in the medium term,” Ms. Harris added.

Highlights are:

  • We are raising our long-term corporate credit rating on Montreal-based Transcontinental Inc. to ‘BBB’ from ‘BBB-‘.
  • We base the upgrade on Transcontinental’s improved operating performance and credit metrics, as reflected in its fiscal 2010 results.
  • The stable outlook is based on our expectation that Transcontinental’s financial policy will be moderate, operating performance will remain good, and the company will manage its credit measures in line with our expectations in the medium term, including maintaining adjusted debt to EBITDA in the 2x area

TCL.PR.D was last mentioned on PrefBlog at the time of issue. TCL.PR.D is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

December 20, 2010

December 20th, 2010

TD is rumoured to be close to a Chrysler Financial deal:

Toronto-Dominion Bank is near an agreement to buy Chrysler Financial, the lender once owned by the third-largest U.S. automaker, from Cerberus Capital Management LP, said three people with knowledge of the matter.

Toronto-Dominion may announce a deal as soon as tomorrow morning, said the people, who spoke on the condition of anonymity because the talks are private. Toronto-Dominion and Cerberus had been discussing a price of about $6 billion to $7 billion, other people with knowledge of the situation said earlier this month.

There are also rumours of a French downgrade:

Costs to insure French government debt trebled this year, rising to an all-time high of 105.5 basis points today, according to data provider CMA. Credit default swaps tied to Czech securities gained 1 basis point to 91 and Chilean swaps were little changed at 89 basis points.

The credit default swaps tied to the French bonds imply a rating of Baa1, seven steps below its actual top ranking of Aaa at Moody’s, according to the New York-based firm’s capital markets research group.

Contracts on Portugal imply a B2 rating, 10 levels below its A1 grade, while swaps tied to Spanish bonds trade at Ba3, 11 steps below its Aa1 ranking, data from the Moody’s research group show. Derivatives protecting Belgian debt imply a rating of Ba1, nine steps below its current rating of Aa1.

It took a while, but it looks as if the IIROC case against TD-Burlington, discussed in March, 2008, has finally reached a conclusion. Yawn. What an abysmal waste of time. If somebody’s putting in silly bids just before the close, then you just programme an algorithm to hit it instantly. The way to get rid of incompetent fools in the industry is by encouraging market efficiency and competition, not more rules. Just ensure retail has access to algorithms, that’s all … a “pounce” algorithm (that will hit any bid over a given price, with or without showing an offer at a higher price) in the hands of retail would have nipped this nonsense in the bud admirably. Or, by not doing so, have showed the breach of UMIR to be inconsequential.

The Canadian preferred share market was on fire today, with PerpetualDiscounts rocketting up 73bp and FixedResets gaining 28bp. Volume continued to be on the heavy side. All the entries on the Volume Highlights table were PerpetualDiscounts; all entries on the Performance Highlights table were winners. Nesbitt did very well on the block trading, but was not quite able to shut out the competition from the Volume report.

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 0.0998 % 2,284.5
FixedFloater 4.77 % 3.46 % 31,544 19.06 1 0.8850 % 3,526.6
Floater 2.62 % 2.39 % 50,770 21.24 4 0.0998 % 2,466.6
OpRet 4.79 % 3.03 % 71,783 2.38 8 0.6475 % 2,391.8
SplitShare 5.34 % 1.14 % 991,472 0.97 4 0.0202 % 2,447.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.6475 % 2,187.1
Perpetual-Premium 5.72 % 5.61 % 147,135 6.42 27 0.1569 % 2,002.2
Perpetual-Discount 5.43 % 5.44 % 289,356 14.70 51 0.7317 % 2,007.6
FixedReset 5.25 % 3.58 % 343,379 3.09 52 0.2826 % 2,253.3
Performance Highlights
Issue Index Change Notes
BNS.PR.L Perpetual-Discount 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 21.50
Evaluated at bid price : 21.82
Bid-YTW : 5.22 %
GWO.PR.I Perpetual-Discount 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 20.79
Evaluated at bid price : 20.79
Bid-YTW : 5.44 %
MFC.PR.D FixedReset 1.07 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-19
Maturity Price : 25.00
Evaluated at bid price : 27.32
Bid-YTW : 3.85 %
RY.PR.E Perpetual-Discount 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 21.60
Evaluated at bid price : 21.60
Bid-YTW : 5.27 %
TD.PR.P Perpetual-Discount 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 24.86
Evaluated at bid price : 25.10
Bid-YTW : 5.30 %
BAM.PR.P FixedReset 1.11 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-30
Maturity Price : 25.00
Evaluated at bid price : 27.21
Bid-YTW : 4.44 %
RY.PR.D Perpetual-Discount 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 21.35
Evaluated at bid price : 21.62
Bid-YTW : 5.24 %
BNS.PR.K Perpetual-Discount 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 23.15
Evaluated at bid price : 23.40
Bid-YTW : 5.19 %
CIU.PR.A Perpetual-Discount 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 21.89
Evaluated at bid price : 22.00
Bid-YTW : 5.27 %
RY.PR.C Perpetual-Discount 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 21.62
Evaluated at bid price : 21.98
Bid-YTW : 5.27 %
SLF.PR.A Perpetual-Discount 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 21.09
Evaluated at bid price : 21.09
Bid-YTW : 5.66 %
RY.PR.G Perpetual-Discount 1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 21.40
Evaluated at bid price : 21.69
Bid-YTW : 5.23 %
RY.PR.W Perpetual-Discount 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 23.20
Evaluated at bid price : 23.45
Bid-YTW : 5.27 %
SLF.PR.F FixedReset 1.28 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-30
Maturity Price : 25.00
Evaluated at bid price : 27.00
Bid-YTW : 3.60 %
BAM.PR.J OpRet 1.38 % YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2018-03-30
Maturity Price : 25.00
Evaluated at bid price : 26.45
Bid-YTW : 4.46 %
CM.PR.H Perpetual-Discount 1.40 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 22.33
Evaluated at bid price : 22.51
Bid-YTW : 5.40 %
CM.PR.K FixedReset 1.52 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 26.75
Bid-YTW : 3.49 %
IAG.PR.C FixedReset 1.54 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-30
Maturity Price : 25.00
Evaluated at bid price : 27.01
Bid-YTW : 3.37 %
SLF.PR.B Perpetual-Discount 1.56 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 21.46
Evaluated at bid price : 21.46
Bid-YTW : 5.62 %
TD.PR.O Perpetual-Discount 1.63 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 23.42
Evaluated at bid price : 23.66
Bid-YTW : 5.19 %
CM.PR.J Perpetual-Discount 1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 21.34
Evaluated at bid price : 21.61
Bid-YTW : 5.27 %
CM.PR.I Perpetual-Discount 1.65 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 22.02
Evaluated at bid price : 22.15
Bid-YTW : 5.38 %
BMO.PR.K Perpetual-Discount 1.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 24.46
Evaluated at bid price : 24.69
Bid-YTW : 5.36 %
MFC.PR.C Perpetual-Discount 2.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 20.16
Evaluated at bid price : 20.16
Bid-YTW : 5.62 %
IAG.PR.A Perpetual-Discount 2.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 21.70
Evaluated at bid price : 21.70
Bid-YTW : 5.32 %
BAM.PR.I OpRet 2.63 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2011-01-19
Maturity Price : 25.50
Evaluated at bid price : 26.14
Bid-YTW : -25.06 %
MFC.PR.B Perpetual-Discount 2.79 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 5.58 %
Volume Highlights
Issue Index Shares
Traded
Notes
GWO.PR.I Perpetual-Discount 115,510 Nesbitt crossed 100,000 at 20.65.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 20.79
Evaluated at bid price : 20.79
Bid-YTW : 5.44 %
RY.PR.F Perpetual-Discount 108,016 Nesbitt crossed 100,000 at 21.85.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 21.51
Evaluated at bid price : 21.85
Bid-YTW : 5.13 %
MFC.PR.B Perpetual-Discount 82,267 Nesbitt crossed 49,300 at 21.00.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 5.58 %
CM.PR.J Perpetual-Discount 75,365 Nesbitt crossed 50,000 at 21.55.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 21.34
Evaluated at bid price : 21.61
Bid-YTW : 5.27 %
CM.PR.I Perpetual-Discount 75,315 RBC crossed 25,000 at 22.05 and 32,500 at 22.15.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 22.02
Evaluated at bid price : 22.15
Bid-YTW : 5.38 %
RY.PR.D Perpetual-Discount 64,780 Nesbitt crossed 50,000 at 21.60.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-20
Maturity Price : 21.35
Evaluated at bid price : 21.62
Bid-YTW : 5.24 %
There were 48 other index-included issues trading in excess of 10,000 shares.

BIS Releases Central Counterparty Risk Weighting Consultation

December 20th, 2010

The Banking Subcommittee of the Bank for International Settlements has released a consultation paper titled Capitalisation of bank exposures to central counterparties:

Generally speaking, the Committee proposes that trade exposures to a qualifying CCP will receive a 2% risk weight. In addition, default fund exposures to a CCP will, in accordance with a risk sensitive waterfall approach (based on a CCP’s actual financial resources and hypothetical capital requirements), be capitalised according to a method that consistently and simply estimates risk arising from such default fund.

As has been discussed on PrefBlog, the purpose of Central Counterparties is to increase the vulnerability of the global financial system to single-point failure, and to provide additional extra-judicial power to bureaucrats who will be empowered to decide who gets to be a member of the Clearing Corporation.

This is considered to be far superior to a system in which the bank at risk makes a credit assessment and, when a trade is going their way, either gets collateral for the exposure or accepts an increment to Risk-Weighted Assets. Such a system would require banks such as CIBC to be as thoughtful about their counterparty exposure as Goldman Sachs; decent risk-management procedures in the industry would leave regulators with less to do.

With the new system, CIBC will be able to load up the Central Counterparty with billions in exposure to the Bank of Downtown Medicine Hat, without having to worry overmuch about its credit quality – the exposure will be covered by the other clearinghouse members.

One of the great problems with the Panic of 2007, we are told, was moral hazard. What I initially misunderstood was the regulators’ attitude: it’s not that they feel there was too much of it; they feel that there wasn’t enough, so they have designed a system to create more.

Sic transit gloria mundi.

Preferred Share Spreadsheets on GoogleDocs: Yield Calculator

December 20th, 2010

I am pleased to announce that the Yield-to-Call Calculator spreadsheet, originally developed by Keith Betty in MS-Excel format, has been reformatted to Google Docs format by Rob Vassov and made available publicly by Hymas Investment Management Inc.

An explanation of the use of the MS-Excel version has been written by James Hymas and republished by Hymas Investment Management Inc.

Please feel free to contact me with any spreadsheets you would like to have published in this manner.

Note that you must copy the spreadsheet to your own Google Docs account in order to use it.

Google Docs Yield-to-Call Calculator

December 17, 2010

December 17th, 2010

Bank of Montreal is buying Marshall & Ilsley:

Bank of Montreal agreed to buy Marshall & Ilsley Corp. for about $4.1 billion in stock to double its U.S. deposits and branches in the largest takeover by Canada’s fourth-biggest bank.

Bank of Montreal will pay 0.1257 of its own share for each share of Marshall & Ilsley, the Toronto-based bank said today in a statement. The deal values Marshall & Ilsley at $7.75 a share, 34 percent higher than yesterday’s closing price of $5.79 on the New York Stock Exchange.

Toronto-Dominion Bank, the country’s second-biggest lender, may reach an agreement to acquire Chrysler Financial Corp., the auto-loan company owned by Cerberus Capital Management LP, three people with knowledge of the matter said this month.

Marshall & Ilsley has posted eight straight quarterly losses while Bank of Montreal has reported six consecutive quarters of profit growth, a streak unmatched by Canada’s five other large lenders. Marshall & Ilsley traded as high as $40 in 2007.

The takeover has a price-to-book ratio of 0.61 for Marshall & Ilsley, less than half of the median ratio of 1.4 for 33 regional, commercial bank deals since the start of 2009, according to Bloomberg merger data.

Australian Banc Capital Securities Trust, briefly discussed here on November 30, and best known for having a kangaroo as part of its logo, which is really, like, awesome, you know? has closed its initial public offering:

The Fund raised gross proceeds of $145,815,760 from the sale of 14 million Class A Units and 581,576 Class F Units, respectively, at a price of $10.00 per Unit. The Fund has granted to the agents an over-allotment option, exercisable for a period of 30 days from the closing date, to offer an additional 2.1 million Class A Units.

The Class A Units are listed on the Toronto Stock Exchange (“TSX”) under the symbol AUZ.UN. Class F Units will not be listed on a stock exchange but may be converted into Class A Units on a weekly basis.

$146-million. With total agents’ fees, by my calculation, of nearly $7.5-million. Sometimes all one can do is shake one’s head.

Moody’s downgraded Ireland:

The yield on the Irish 10- year Irish bond rose to 8.60 percent, the highest since Dec. 2, and German bund yields fell. Credit-default swaps insuring Irish debt climbed for a third day, the longest streak this month.

Portuguese bonds also fell as Ireland’s credit rating was cut five levels to Baa1 from Aa2 by Moody’s, with further downgrades possible, as the government struggled to contain losses in the country’s banking system. European Union leaders are meeting in Brussels after agreeing yesterday to create a permanent crisis-management mechanism.

It was a good day on the Canadian preferred share market today, as preferreds finally caught a bid after a long string of losses. TXPR total return is still down about 1.46% on the month-to-date, though, so don’t upgrade your New Year’s champagne plans just yet. PerpetualDiscounts were up 34bp and FixedResets gained 13bp on continued elevated volume.

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 0.1124 % 2,282.2
FixedFloater 4.81 % 3.51 % 29,648 19.01 1 -0.7030 % 3,495.6
Floater 2.62 % 2.40 % 50,834 21.23 4 0.1124 % 2,464.2
OpRet 4.83 % 3.46 % 71,155 2.39 8 -0.0965 % 2,376.4
SplitShare 5.34 % 1.13 % 1,030,650 0.97 4 0.1211 % 2,446.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0965 % 2,173.0
Perpetual-Premium 5.73 % 5.66 % 148,741 6.43 27 0.1305 % 1,999.0
Perpetual-Discount 5.47 % 5.49 % 274,737 14.67 51 0.3420 % 1,993.0
FixedReset 5.27 % 3.64 % 347,736 3.10 52 0.1277 % 2,246.9
Performance Highlights
Issue Index Change Notes
NA.PR.M Perpetual-Premium -1.35 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-14
Maturity Price : 25.00
Evaluated at bid price : 25.65
Bid-YTW : 5.66 %
BAM.PR.I OpRet -1.16 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2011-07-30
Maturity Price : 25.25
Evaluated at bid price : 25.47
Bid-YTW : 3.70 %
GWO.PR.M Perpetual-Premium 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-17
Maturity Price : 24.58
Evaluated at bid price : 24.80
Bid-YTW : 5.86 %
CM.PR.M FixedReset 1.05 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 27.89
Bid-YTW : 3.43 %
SLF.PR.B Perpetual-Discount 1.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-17
Maturity Price : 21.13
Evaluated at bid price : 21.13
Bid-YTW : 5.71 %
BNS.PR.N Perpetual-Discount 1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-17
Maturity Price : 24.25
Evaluated at bid price : 24.48
Bid-YTW : 5.43 %
GWO.PR.G Perpetual-Discount 1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-17
Maturity Price : 23.05
Evaluated at bid price : 23.30
Bid-YTW : 5.59 %
RY.PR.A Perpetual-Discount 2.31 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-17
Maturity Price : 21.47
Evaluated at bid price : 21.74
Bid-YTW : 5.15 %
Volume Highlights
Issue Index Shares
Traded
Notes
BMO.PR.L Perpetual-Premium 214,100 Desjardins crossed three blocks, of 100,000 shares, 50,000 and 54,800, all at 25.55.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-24
Maturity Price : 25.00
Evaluated at bid price : 25.51
Bid-YTW : 5.53 %
TD.PR.M OpRet 116,200 Desjardins crossed 100,000 at 25.85.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2011-05-30
Maturity Price : 25.50
Evaluated at bid price : 25.78
Bid-YTW : 3.50 %
RY.PR.A Perpetual-Discount 59,550 rBC crossed 49,200 at 21.50.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-17
Maturity Price : 21.47
Evaluated at bid price : 21.74
Bid-YTW : 5.15 %
CM.PR.M FixedReset 53,083 RBC crossed 25,000 at 27.75.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-08-30
Maturity Price : 25.00
Evaluated at bid price : 27.89
Bid-YTW : 3.43 %
TD.PR.O Perpetual-Discount 39,752 Nesbitt crossed 25,000 at 23.32.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-17
Maturity Price : 23.06
Evaluated at bid price : 23.28
Bid-YTW : 5.27 %
RY.PR.I FixedReset 34,300 RBC crossed 24,100 at 26.20.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-26
Maturity Price : 25.00
Evaluated at bid price : 26.10
Bid-YTW : 3.63 %
There were 41 other index-included issues trading in excess of 10,000 shares.

ASC.PR.A to Seek Term Extension

December 17th, 2010

Manulife Asset Management Limited, the manager of AIC Global Financial Split Corp. has announced:

that it intends to extend the termination date of the Corporation which is currently set for May 31, 2011 for another five years, with a new termination date scheduled to be on May 31, 2016.

The proposed extension would provide securityholders the potential to benefit from a more complete market recovery of the Corporation’s Net Asset Value.

A special meeting of holders of the Class A Shares and Preferred Shares of the Corporation will be held to consider and vote upon the extension. Further details of the extension will be outlined in a management information circular to be prepared and delivered to holders of the Class A Shares and Preferred Shares in connection with the special meeting. Such extension would be subject to any required regulatory approvals.

This must be the most ridiculous attempt to extend term ever. The NAV as of Dec. 17 is $9.98 – that is, the $10 p.v. preferred shares are actualy underwater right now. I feel quite safe in saying that the only reason they’re quoted at 9.19-27 is due to the imminence of the scheduled redemption date.

The press release does not mention who is going to pay the expenses of the special meeting – I’ll bet a nickel that expenses will be borne by the Split Share Corp., not the manager.

The fund started in 2004, and there is nothing unusual about its terms. As can be surmised from the name of the fund, it simply ran into a train wreck; there’s no shame in that.

There is shame, however, in such a grossly abusive waste of shareholder time and money as to seek a term extension. I can think of no inducement that could possibly be offered to the preferred shareholders that would cause an alert and prudent preferred shareholder to vote in favour of a term extension. As with the reorganization of XCM.PR.A and XMF.PR.A, any value at all that is offered to the Capital Unitholders comes directly out of the preferred shareholders’ pockets.

I am surprised that Manulife is putting its name such a sleazy exercise, simply in an attempt to keep fourteen lousy million dollars under management – assuming there are no retractions on the scheduled wind-up date date. And trust me, if this obscenity somehow passes I’ll be recommending retraction.

Vote no.

ASC.PR.A was last mentioned on PrefBlog when DBRS withdrew its rating at the request of the manager. ASC.PR.A is tracked by HIMIPref™, but is relegated to the Scraps index on credit concerns.

Basel III

December 17th, 2010

The Basel Committee on Banking Supervision has released the Basel III: A global regulatory framework for more resilient banks and banking systems:

To address the systemic risk arising from the interconnectedness of banks and other financial institutions through the derivatives markets, the Committee is supporting the efforts of the Committee on Payments and Settlement Systems (CPSS) and the International Organization of Securities Commissions (IOSCO) to establish strong standards for financial market infrastructures, including central counterparties. The capitalisation of bank exposures to central counterparties (CCPs) will be based in part on the compliance of the CCP with such standards, and will be finalised after a consultative process in 2011. A bank’s collateral and mark-to-market exposures to CCPs meeting these enhanced principles will be subject to a low risk weight, proposed at 2%; and default fund exposures to CCPs will be subject to risk-sensitive capital requirements. These criteria, together with strengthened capital requirements for bilateral OTC derivative exposures, will create strong incentives for banks to move exposures to such CCPs. Moreover, to address systemic risk within the financial sector, the Committee also is raising the risk weights on exposures to financial institutions relative to the non-financial corporate sector, as financial exposures are more highly correlated than non-financial ones.

It is worthwhile thinking about how the CCP exposure will blow up – because it will, never fear! I have often stressed the poor design inherent in developing a system so exposed to long-term single point failure, but the desperate need of the regulators to be seen as doing something has overwhelmed such antiquated notions as common sense.

On the other hand, it is good to see that risk-weights on exposure to financial institutions is being raised, but the details need to be examined. Unfortunately, they appear to apply only to collateralized derivative transactions, not to bank paper itself.

They also tout the introduction of a leverage ratio cap:

One of the underlying features of the crisis was the build up of excessive on- and off-balance sheet leverage in the banking system. The build up of leverage also has been a feature of previous financial crises, for example leading up to September 1998. During the most severe part of the crisis, the banking sector was forced by the market to reduce its leverage in a manner that amplified downward pressure on asset prices, further exacerbating the positive feedback loop between losses, declines in bank capital, and the contraction in credit availability. The Committee therefore is introducing a leverage ratio requirement that is intended to achieve the following objectives:
  • constrain leverage in the banking sector, thus helping to mitigate the risk of the destabilising deleveraging processes which can damage the financial system and the economy; and
  • introduce additional safeguards against model risk and measurement error by supplementing the risk-based measure with a simple, transparent, independent measure of risk.

    17. The leverage ratio is calculated in a comparable manner across jurisdictions, adjusting for any differences in accounting standards. The Committee has designed the leverage ratio to be a credible supplementary measure to the risk-based requirement with a view to migrating to a Pillar 1 treatment based on appropriate review and calibration.

The previously agreed capital requirements are confirmed:

All elements above are net of the associated regulatory adjustments and are subject to the following restrictions (see also Annex 1):
  • Common Equity Tier 1 must be at least 4.5% of risk-weighted assets at all times.
  • Tier 1 Capital must be at least 6.0% of risk-weighted assets at all times.
  • Total Capital (Tier 1 Capital plus Tier 2 Capital) must be at least 8.0% of risk-weighted assets at all times.

Of greatest interest to preferred share investors are the rules regarding eligibility for inclusion in “Additional Tier 1 Capital”. Most of this is a simple continuation of extant rules, but:

Dividend/coupon discretion:
a. the bank must have full discretion at all times to cancel distributions/payments(footnote)
b. cancellation of discretionary payments must not be an event of default
c. banks must have full access to cancelled payments to meet obligations as they fall due
d. cancellation of distributions/payments must not impose restrictions on the bank except in relation to distributions to common stockholders.

footnote: A consequence of full discretion at all times to cancel distributions/payments is that “dividend pushers” are prohibited. An instrument with a dividend pusher obliges the issuing bank to make a dividend/coupon payment on the instrument if it has made a payment on another (typically more junior) capital instrument or share. This obligation is inconsistent with the requirement for full discretion at all times. Furthermore, the term “cancel distributions/payments” means extinguish these payments. It does not permit features that require the bank to make distributions/payments in kind.

Heretofore, it has been possible (unlikely, but possible) that preferred shares could default while Innovative Tier 1 Capital pays in full. If I’m reading this section correctly, the footnote means that, in principle if not necessarily in practice, all elements of Tier 1 Capital will be parri passu.

The footnote nearly gave me a heart attack, as in and of itself it appears to prohibit the preference of dividends; however, such an interpretation conflicts with point (d), which explicitly allows seniority to common.

Also of interest is section 12:

Neither the bank nor a related party over which the bank exercises control or significant influence can have purchased the instrument, nor can the bank directly or indirectly have funded the purchase of the instrument.

This would appear to prohibit margining in stock accounts. Come to think of it, I’m not sure if this has ever been addressed: can you buy TD common on margin in your TDW account?

The discussion of subordinated debt is interesting:

May be callable at the initiative of the issuer only after a minimum of five years:
a. To exercise a call option a bank must receive prior supervisory approval;
b. A bank must not do anything that creates an expectation that the call will be exercised;(19) and
c. Banks must not exercise a call unless:
i. They replace the called instrument with capital of the same or better quality and the replacement of this capital is done at conditions which are sustainable for the income capacity of the bank(20); or
ii. The bank demonstrates that its capital position is well above the minimum capital requirements after the call option is exercised.(21)

Footnotes:

(19) An option to call the instrument after five years but prior to the start of the amortisation period will not be viewed as an incentive to redeem as long as the bank does not do anything that creates an expectation that the call will be exercised at this point.

(20) Replacement issues can be concurrent with but not after the instrument is called.

(21) Minimum refers to the regulator’s prescribed minimum requirement, which may be higher than the Basel III Pillar 1 minimum requirement.

In Canada, one wonders whether footnote (19) will prohibit bank-owned brokerages from quoting the yields on sub-debt to a presumed maturity due to a call at the start of the amortization period. It should; but this might damage the long term career prospects of OSFI personnel, so I’m not holding my breath.

Market pressures – due to the way sub-debt is sold – are so extreme as to make the call de facto mandatory; it is very disappointing that BIS is not addressing this problem.

Given the abuses that have ocdurred in the sub-debt market over the past few years due to market expectation of such a call, I am rather disappointed to see that such calls are still allowable.

Of interest to Citigroup is:

69. Deferred tax assets (DTAs) that rely on future profitability of the bank to be realised are to be deducted in the calculation of Common Equity Tier 1.

Citigroup now has a Tier 1 Capital Common Ratio of 2.16% and a Tier 1 Capital Ratio of 11.92%; although it looks like they’re playing games in the press release:

Citi remained one of the best capitalized banks with $125.4 billion of Tier 1 Capital and a Tier 1 Common ratio of 10.3% at the end of the third quarter 2010.

When in doubt, invent a new non-GAAP, non-BIS ratio, that’s what I say! The 2009 Annual Report is more forthcoming with calculation methodologies:

Of Citi’s approximately $46 billion of net deferred tax assets at December 31, 2009, approximately $15 billion of such assets were includable without limitation in regulatory capital pursuant to risk-based capital guidelines, while approximately $26 billion of such assets exceeded the limitation imposed by these guidelines and, as “disallowed deferred tax assets,” were deducted in arriving at Tier 1 Capital. Citigroup’s other approximately $5 billion of net deferred tax assets primarily represented approximately $3 billion of deferred tax effects of unrealized gains and losses on available-for-sale debt securities and approximately $2 billion of deferred tax effects of the pension liability adjustment, which are permitted to be excluded prior to deriving the amount of net deferred tax assets subject to limitation under the guidelines. Citi had approximately $24 billion of disallowed deferred tax assets at December 31, 2008.

Back to BIS … I’m very pleased to see this:

Banks are also required to make available on their websites the full terms and conditions of all instruments included in regulatory capital. The Basel Committee will issue more detailed Pillar 3 disclosure requirements in 2011.

Also of interest are the specifics of the Capital Conservation Buffer:

131. The table below shows the minimum capital conservation ratios a bank must meet at various levels of the Common Equity Tier 1 (CET1) capital ratios. For example, a bank with a CET1 capital ratio in the range of 5.125% to 5.75% is required to conserve 80% of its earnings in the subsequent financial year (ie payout no more than 20% in terms of dividends,share buybacks and discretionary bonus payments). If the bank wants to make payments in excess of the constraints imposed by this regime, it would have the option of raising capital in the private sector equal to the amount above the constraint which it wishes to distribute. This would be discussed with the bank’s supervisor as part of the capital planning process. The Common Equity Tier 1 ratio includes amounts used to meet the 4.5% minimum Common Equity Tier 1 requirement, but excludes any additional Common Equity Tier 1 needed to meet the 6% Tier 1 and 8% Total Capital requirements. For example, a bank with 8% CET1 and no Additional Tier 1 or Tier 2 capital would meet all minimum capital requirements, but would have a zero conservation buffer and therefore by subject to the 100% constraint on capital distributions.

Individual bank minimum capital conservation standards
Common Equity Tier 1 Ratio Minimum Capital Conservation Ratios (expressed as a percentage of earnings)
4.5% – 5.125% 100%
5.125% – 5.75% 80%
>5.75% – 6.375% 60%
>6.375% – 7.0% 40%
> 7.0% 0%

Unfortunately, the Countercyclical Buffer remains a matter of regulatory discretion:

Each Basel Committee member jurisdiction will identify an authority with the responsibility to make decisions on the size of the countercyclical capital buffer. If the relevant national authority judges a period of excess credit growth to be leading to the build up of system-wide risk, they will consider, together with any other macroprudential tools at their disposal, putting in place a countercyclical buffer requirement. This will vary between zero and 2.5% of risk weighted assets, depending on their judgement as to the extent of the build up of system-wide risk.

The leverage cap looks pretty loose

The Committee will test a minimum Tier 1 leverage ratio of 3% during the parallel run period from 1 January 2013 to 1 January 2017.

161. Banks should calculate derivatives, including where a bank sells protection using a credit derivative, for the purposes of the leverage ratio by applying:
  • the accounting measure of exposure plus an add-on for potential future exposure calculated according to the Current Exposure Method as identified in paragraphs 186, 187 and 317 of the Basel II Framework. This ensures that all derivatives are converted in a consistent manner to a “loan equivalent” amount; and
  • the regulatory netting rules based on the Basel II Framework.

(iii) Off-balance sheet items
162. This section relates to off-balance sheet (OBS) items in paragraphs 82-83, (including 83(i)), 84(i-iii), 85-86, and 88-89) of the Basel II Framework. These include commitments (including liquidity facilities), unconditionally cancellable commitments, direct credit substitutes, acceptances, standby letters of credit, trade letters of credit, failed transactions and unsettled securities. The treatment of the items included in 83(ii) and 84, ie repurchase agreements and securities financing transactions is addressed above.

163. The Committee recognises that OBS items are a source of potentially significant leverage. Therefore, banks should calculate the above OBS items for the purposes of the leverage ratio by applying a uniform 100% credit conversion factor (CCF).

164. For any commitments that are unconditionally cancellable at any time by the bank without prior notice, banks should apply a CCF of 10%. The Committee will conduct further review to ensure that the 10% CCF is appropriately conservative based on historical experience.

It’s going to take quite a while to digest all this!

December 16, 2010

December 16th, 2010

Looks like efforts to determine whodunnit have broken down amidst political jockeying:

Democrats and Republicans on the Financial Crisis Inquiry Commission, struggling for months to find consensus behind the scenes, haven’t even been able to agree on whether to include the phrases “Wall Street” and “shadow banking” in the final report. The report is now scheduled to be published in January and is likely to include dissents, FCIC members said yesterday.

The four Republicans on the 10-member panel made their views public in a nine-page document yesterday, saying they place much of the blame for the 2008 crisis on the government and mortgage firms Fannie Mae and Freddie Mac rather than banks.

The dissent itself commences with something sensible:

Bubbles happen. In retrospect, they always seem easy to identify, but as they are building, experts debate whether they exist—and, if so, why. The recent housing bubble was no different. Despite national home price appreciation well above the historical trend for almost a decade, and local markets with even more pronounced price swings, most homeowners and mortgage investors believed there were sound fundamentals underpinning their investments.

… and to a large extent blame the elephant:

There were three important ways that the government pushed investors toward investing in mortgage debt. First, the regulatory capital requirements associated with mortgage debt were lower than for other investments. Second, the government encouraged the private market to extend credit to previously underserved borrowers through a combination of legislation, regulation, and moral suasion. Third, and most important, during the bubble’s expansion, the largest investors in the mortgage market, the government-sponsored enterprises (GSEs)—Fannie Mae and Freddie Mac—were instruments of U.S. government housing policy.

All this is true. I’m disappointed to see that there is no criticism of structural problems in the US mortgage market: 30-year terms with the homeowner able to redeem at par at any time; no recourse to the borrower in the event of default; tax-deductibility of mortgage payments.

The Republicans address tranche retention:

Super-senior risk: The safest, “super-senior” tranches of mortgage-backed structured products were less attractive to investors because they did not provide a sufficient spread above other, safer securities, like U.S. Treasuries.

This looks like it’s glossing over some stuff, to put it mildly. Why is a brokerage creating products too expensive to sell? I don’t think we can paint the brokers as victims on this one.

As I have urged before, I believe there should be not one, but two regulatory regimes: one for banks, expected to buy-and-hold and surcharging trading activities; one for brokerages, expected to trade, surcharging aged inventory.

The Boston Fed has released a policy brief by Jihye Jeon, Judit Montoriol-Garriga, Robert K. Triest, and J. Christina Wang titled Evidence of a Credit Crunch? Results from the 2010 Survey of First District Community Banks:

This policy brief summarizes the findings of the Survey of Community Banks conducted by the Federal Reserve Bank of Boston in May 2010. This survey seeks to understand how the supply of, and demand for, bank business loans changed in the period following the financial crisis. The survey design focuses on assessing how much community banks were willing and able to lend to local businesses that used to be customers of large banks but lost access to credit in the aftermath of the financial crisis. The survey responses provide some evidence that lending standards for commercial loans have tightened moderately at community banks since late 2008, with the tightening being more severe for new customers than for those that already had a relationship with the respondent bank. The survey also reveals that expansions of several SBA guarantee programs since the crisis have ameliorated possible credit constraints on small businesses.

BIS has released the BIS Quarterly Review, December 2010 with features:

  • The $4 trillion question: what explains FX growth since the 2007 survey?
  • Derivatives in emerging markets
  • Counterparty risk and contract volumes in the credit default swap market
  • A user’s guide to the Triennial Central Bank Survey of foreign exchange
    market activity

Additionally, Basel III rules text and results of the quantitative impact study issued by the Basel Committee.

The Basel Committee issued today the Basel III rules text, which presents the details of global regulatory standards on bank capital adequacy and liquidity agreed by the Governors and Heads of Supervision, and endorsed by the G20 Leaders at their November Seoul summit. The Committee also published the results of its comprehensive quantitative impact study (QIS).

The rules text presents the details of the Basel III Framework, which covers both microprudential and macroprudential elements. The Framework sets out higher and better-quality capital, better risk coverage, the introduction of a leverage ratio as a backstop to the risk-based requirement, measures to promote the build up of capital that can be drawn down in periods of stress, and the introduction of two global liquidity standards.

With respect to the leverage ratio, the Committee will use the transition period to assess whether its proposed design and calibration is appropriate over a full credit cycle and for different types of business models. Based on the results of a parallel run period, any adjustments would be carried out in the first half of 2017 with a view to migrating to a Pillar 1 treatment on 1 January 2018 based on appropriate review and calibration.

OSFI notes:

As stated in the rules text, the BCBS is finalizing additional entry criteria related to non-viability contingent capital (NVCC) for instruments other than common equity. Once finalized, the additional criteria are to be added to the Basel III rules text. We currently expect this to occur early in 2011.
The Basel III rules affect the eligibility of instruments for inclusion in regulatory capital and provide for a transition and phase-out for instruments that do not meet the Basel III requirements. OSFI intends to adopt the Basel III changes in its domestic capital guidance for deposit-taking institutions (DTIs). As the Basel III rules text currently provides that the cap on non-qualifying capital will be applied to Tier 1 and Tier 2 instruments separately and refers to the total amount of non-qualifying capital, the finalization of rules related to NVCC may affect the operation of the cap on Tier 1 and Tier 2 non-qualifying instruments. Once the Basel III rules text governing NVCC requirements has been finalized by the BCBS, OSFI intends to issue guidance clarifying the phase-out of all non-qualifying instruments by DTIs, including OSFI’s expectations with respect to rights of redemption under regulatory event5 clauses.

This letter does not apply to regulated life insurance companies or insurance holding companies. While such insurers should be aware of developments related to DTIs on matters where OSFI has traditionally aligned its regulatory requirements (such as eligible capital instruments), OSFI intends to engage in consultation during 2011 before determining which Basel III rule changes will be applied to the life insurance industry and to thereafter issue guidance to insurers to reflect such changes.

The Feds are proposing Pooled Registered Pension Plans, which have been praised by insurance salemen in all walks of life. Blake’s explains:

The main items discussed in the Backgrounder are as follows:

1. Eligible Administrators of the PRPPs will be regulated financial institutions, including trust and insurance companies and other financial institutions with a trust subsidiary.
2. The Administrator will have a fiduciary duty to plan members.

3. The PRPPs will have a suitable low-cost default investment option for a broad group, and a manageable number of investment options for members to choose from.

4. Administrators will be required to provide all members with prescribed information on a regular, periodic basis.

5. There will be certain tasks that an employer that offers a PRPP must fulfill.

6. Employers may be permitted to enrol their employees into a PRPP at any stage of their employment and there may be rights of an employee to “opt out” shortly after enrolment.

7. The framework also provides that employers will have the ability to increase the employee’s default contribution rate from time to time, potentially subject to a new “opt out” right.

8. Employer contributions will be locked-in with some jurisdictions permitting what appears to be limited unlocking rights.

9. Jurisdictions will make a determination as to whether to require mandatory employer participation.

10. Employers contributing directly to a PRPP and their employees will be permitted to make contributions under the RPP limits, with the pension adjustment reporting. Self-employed persons and other employees will contribute on the basis of their available RRSP limit.”

The Canadian preferred share market had another poor day on high volume, with PerpetualDiscounts bearing the brunt of the losses. PerpetualDiscounts were down 32bp, while FixedResets lost 4bp.

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 -0.0499 % 2,279.6
FixedFloater 4.78 % 3.47 % 28,230 19.06 1 -1.0435 % 3,520.4
Floater 2.62 % 2.40 % 49,500 21.23 4 -0.0499 % 2,461.4
OpRet 4.82 % 3.18 % 71,299 2.39 8 -0.3464 % 2,378.7
SplitShare 5.35 % 1.13 % 1,073,580 0.98 4 0.1111 % 2,443.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.3464 % 2,175.1
Perpetual-Premium 5.74 % 5.61 % 154,456 6.42 27 -0.1031 % 1,996.4
Perpetual-Discount 5.49 % 5.49 % 273,631 14.62 51 -0.3224 % 1,986.2
FixedReset 5.27 % 3.70 % 360,286 3.10 52 -0.0370 % 2,244.1
Performance Highlights
Issue Index Change Notes
ELF.PR.F Perpetual-Discount -2.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-16
Maturity Price : 21.88
Evaluated at bid price : 22.16
Bid-YTW : 6.08 %
BAM.PR.I OpRet -1.83 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2011-01-15
Maturity Price : 25.50
Evaluated at bid price : 25.77
Bid-YTW : -9.88 %
ELF.PR.G Perpetual-Discount -1.72 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-16
Maturity Price : 19.95
Evaluated at bid price : 19.95
Bid-YTW : 6.07 %
GWO.PR.G Perpetual-Discount -1.33 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-16
Maturity Price : 22.81
Evaluated at bid price : 23.04
Bid-YTW : 5.65 %
POW.PR.B Perpetual-Discount -1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-16
Maturity Price : 23.42
Evaluated at bid price : 23.71
Bid-YTW : 5.73 %
RY.PR.B Perpetual-Discount -1.11 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-16
Maturity Price : 22.20
Evaluated at bid price : 22.34
Bid-YTW : 5.31 %
BAM.PR.G FixedFloater -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-16
Maturity Price : 25.00
Evaluated at bid price : 22.76
Bid-YTW : 3.47 %
IAG.PR.F Perpetual-Premium -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-16
Maturity Price : 24.54
Evaluated at bid price : 24.76
Bid-YTW : 5.97 %
MFC.PR.C Perpetual-Discount -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-16
Maturity Price : 19.64
Evaluated at bid price : 19.64
Bid-YTW : 5.77 %
BNA.PR.E SplitShare 1.03 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 24.50
Bid-YTW : 5.22 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PR.C FixedReset 86,855 RBC crossed 70,000 at 26.70.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-02
Maturity Price : 25.00
Evaluated at bid price : 26.62
Bid-YTW : 3.66 %
RY.PR.B Perpetual-Discount 46,986 RBC crosed 25,000 at 22.34.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-16
Maturity Price : 22.20
Evaluated at bid price : 22.34
Bid-YTW : 5.31 %
MFC.PR.B Perpetual-Discount 40,778 Desardins crossed 30,000 at 20.50.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-16
Maturity Price : 20.45
Evaluated at bid price : 20.45
Bid-YTW : 5.72 %
SLF.PR.C Perpetual-Discount 40,290 RBC crossed 25,000 at 19.45.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-16
Maturity Price : 19.40
Evaluated at bid price : 19.40
Bid-YTW : 5.76 %
CM.PR.H Perpetual-Discount 31,320 RBC crossed 25,000 at 22.15.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-16
Maturity Price : 21.75
Evaluated at bid price : 22.04
Bid-YTW : 5.51 %
POW.PR.B Perpetual-Discount 30,900 RBC crossed 25,000 at 23.80.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-16
Maturity Price : 23.42
Evaluated at bid price : 23.71
Bid-YTW : 5.73 %
There were 51 other index-included issues trading in excess of 10,000 shares.

CPX.PR.A Closes Firm on Good Volume

December 16th, 2010

Capital Power Corporation has announced:

that it has closed its previously announced offering of 5,000,000 Cumulative Rate Reset Preference Shares, Series 1 (the “Series 1 Shares”) at a price of $25 per Series 1 Share (the “Offering”) for aggregate gross proceeds of $125 million on a bought deal basis with a syndicate of underwriters, led by TD Securities Inc. and RBC Capital Markets.

CPX.PR.A is a FixedReset 4.60%+217 announced December 1. The issue traded 262,349 shares in a range of 24.85-95 before closing at 24.88-90, 4×116.

Vital statistics are:

CPX.PR.A FixedReset YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2040-12-16
Maturity Price : 24.83
Evaluated at bid price : 24.88
Bid-YTW : 4.59 %

LBS.PR.A: Warrant Offering

December 16th, 2010

Brompton Group has announced:

that it has filed a preliminary prospectus relating to an offering of warrants to Class A shareholders of the Company. Each Class A shareholder will receive one half of a warrant for each Class A share held on a record date which will be set upon filing of the final prospectus.

One warrant will entitle the holder to purchase a Unit (consist ing of one Class A share and one Preferred share of the Company) upon payment of the subscription price, which will be determined as the lesser of:
(i) $18.87 (which is the sum of (a) the most recently calculated NAV per Unit prior to the date hereof and
(b) the estimated per Unit fees and expenses of the offering), and (ii) the most recently calculated NAV per Unit prior to the date of filing the final prospectus plus the estimated per Unit fees and expenses of the offering. The Company has applied to list the warrants and the Class A shares and Preferred shares issuable on the exercise thereof on the TSX.

Successful completion of the warrants offering will provide the Company with additional capital that can be used to take advantage of attractive investment opportunities and it is also expected to increase the trading liquidity of the Class A shares and Preferred shares and reduce the ongoing management expense ratio of the Company.

There is no word yet regarding the exercise date of the warrants, but with the last one the warrants were outstanding for about a month.

LBS.PR.A was last mentioned on PrefBlog at the time of their warrant offering five months ago, which was something of a fizzle. LBS.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.