Archive for January, 2012

January 31, 2012

Tuesday, January 31st, 2012

The Greek tragedy continues:

Greece pledged a last-ditch effort to prevent the collapse of a second rescue package from creditors, aiming to complete talks this week on a financial lifeline that’s been in the works for six months.

Greek Premier Lucas Papademos said he would try to meet German-led demands for a bigger debt writedown by investors and deeper budget cuts by his government.

Papademos said “some difficulties” beset the debt-swap talks and hinted that donor governments may have to put up more money. Greek Finance Minister Evangelos Venizelos said today in Athens that a formal debt-swap offer must be made by Feb. 13.

Greek Needs
Merkel’s comments indicated that governments are loath to boost an October offer of 130 billion euros of loans in a second package, forcing investors to absorb net-present-value losses on Greek bonds that go beyond the 69 percent now on the table. Greece’s initial rescue of 110 billion euros in 2010 was fully taxpayer-funded.

Creditors are prepared to accept an average coupon of as low as 3.6 percent on new 30-year bonds, said a person familiar with the talks, who declined to be identified because a final deal hasn’t been struck yet. As recently as Jan. 23, creditors wanted an average coupon of about 4.25 percent, two people familiar with the talks said then.

In turn, Greece’s feuding political parties face pressure to deliver more savings and to verify in writing that the austerity program will be carried out, no matter who wins elections to replace Papademos’s interim Cabinet.

I suggest they call in Canadian defence minister Peter MacKay for a consultation. He’s good at putting things in writing!

But there’s a fascinating twist to the Greek negotiations:

In discussions late last week in Athens, creditors lowered their demands for an average coupon on the new 30-year securities they would receive to as little as 3.6 percent from 4.25 percent after European officials demanded they take steeper losses, people familiar with the matter said at the time.

While the lower coupon would lead to an estimated loss of 70 percent or more for investors, adding a so-called gross domestic product warrant — which would pay bondholders more if the Greek economy rebounds — would trim the loss in net present value terms by an estimated 0.5 to 3 percentage points, said two people, who declined to be identified because the talks are confidential.

I bet some people are watching the negotiations with keen interest:

California (STOCA1)’s cash may be exhausted by March, Controller John Chiang said in a letter to lawmakers.

The nation’s most-populous state needs $3.3 billion to deal with liquidity needs for March and the first two weeks of April, Chiang said in the letter to state Senator Mark Leno and Assemblyman Bob Blumenfield, who leads the Joint Legislative Budget Committee

State receipts were $2.6 billion lower than forecast through Dec. 31, while expenditures were an equal amount higher, Chiang said.

BRF.PR.A was affirmed at P-3(high) by S&P:

  • We are assigning our ‘BBB’ long-term corporate credit rating and ‘A-2’ short-term rating to the newly formed Brookfield Renewable Energy Partners L.P. (BREP).
  • We are also affirming our ‘BBB’ issue-level rating on the approximately C$1.1 billion rated unsecured debt at BRP Finance ULC and ‘BB+’ global scale and ‘P-3(High)’ Canada scale ratings on Brookfield Renewable Power Preferred Equity Inc.’s preferred stock that BREP assumed as part of the combination.
  • In addition, we are withdrawing our ratings, including our ‘BBB’
    long-term corporate credit rating, on both Brookfield Renewable Power Inc. (BRPI) and Brookfield Renewable Power Fund (BRPF) at the companies’ request as a consequence of combination of the two companies.
  • We base the rating on our view that the combined credit risk profile of BREP’s portfolio being at least as good as BRPI’s portfolio combined with BRPF.
  • The stable outlook reflects our view of the company’s satisfactory business risk profile, which reflects its diversified electricity generation asset portfolio.

The DBRS report on CZP.PR.A’s parent has been updated:

DBRS has today updated its report on Capital Power Income L.P. (the Partnership or CPILP). CPILP’s ratings were downgraded on November 16, 2011, following the close of the acquisition of CPILP by Atlantic Power Corporation (ATP, not rated by DBRS) (the Transaction) on November 7, 2011. At that time, an Issuer Rating of BB was assigned based on the assessment of the new combined entity and a recovery rating of RR4 (indicating an expected recovery of 30% to 50%) was assigned to the Senior Unsecured & Medium-Term Notes.

Post acquisition, CPILP is expected to generate reasonable cash flows from its diverse long-term power contracts. However, the overall credit quality of CPILP has deteriorated due to its weakened financial profile, complex financial structure and subordination implications. These factors have offset increases in the average power purchase agreement (PPA) term, asset base and market capitalization as well as benefits from the greater diversification of fuel source, geography and counterparty risk of the combined entity.

In the medium to long term, CPILP’s cash flow stability will be largely dependent upon its ability to continue to improve operating performance, enhance revenue by ensuring it renegotiates and renews PPAs expiring in the near term at economically acceptable terms and secure long-term energy supply and operating contracts. DBRS estimates cash flow-to-debt and EBITDA interest coverage ratios to average approximately 11% and 2.7 times respectively in the near to medium term. These metrics remain adequate for the current BB rating. DBRS expects that existing outstanding CPILP debt will be refinanced at the ATP level as they mature.

It was a calm day for the Canadian preferred share market, with PerpetualDiscounts up 1bp, FixedResets gaining 9bp and DeemedRetractibles winning 13bp. All entries on the Performance Highlights table were winners. Volume was above average.

PerpetualDiscounts now yield 4.90%, equivalent to 6.37% interest at the standard equivalency factor of 1.3x; note that this measure is plagued by the fact that there are only seven PerpetualDiscounts left in the index and that after the month-end index rebalacing there will only be four! The figures should be taken with a grain of salt – or perhaps a truckload. Long corporates now yield about 4.55%, so the pre-tax interest-equivalent spread (in this context it is referred to as the Seniority Spread) is now aout 180bp, slightly narrower than the 185bp reported on January 18.

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 0.7807 % 2,407.7
FixedFloater 4.69 % 4.07 % 42,041 17.26 1 0.0000 % 3,323.9
Floater 2.77 % 2.98 % 62,619 19.77 3 0.7807 % 2,599.6
OpRet 4.90 % 0.37 % 66,130 1.29 7 -0.0326 % 2,520.4
SplitShare 5.31 % -0.39 % 72,679 0.86 4 0.3819 % 2,636.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0326 % 2,304.6
Perpetual-Premium 5.40 % -6.34 % 101,888 0.09 23 0.0776 % 2,215.6
Perpetual-Discount 4.96 % 4.90 % 180,893 15.21 7 0.0058 % 2,442.9
FixedReset 5.03 % 2.68 % 206,878 2.33 65 0.0913 % 2,387.4
Deemed-Retractible 4.89 % 3.47 % 206,338 1.28 46 0.1270 % 2,311.9
Performance Highlights
Issue Index Change Notes
SLF.PR.F FixedReset 1.05 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-30
Maturity Price : 25.00
Evaluated at bid price : 26.95
Bid-YTW : 2.87 %
BAM.PR.R FixedReset 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-31
Maturity Price : 23.64
Evaluated at bid price : 26.55
Bid-YTW : 3.56 %
PWF.PR.A Floater 1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-31
Maturity Price : 21.35
Evaluated at bid price : 21.35
Bid-YTW : 2.45 %
BNA.PR.E SplitShare 1.20 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 24.50
Bid-YTW : 5.43 %
BAM.PR.K Floater 1.49 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-31
Maturity Price : 17.70
Evaluated at bid price : 17.70
Bid-YTW : 2.98 %
Volume Highlights
Issue Index Shares
Traded
Notes
CM.PR.L FixedReset 100,840 Scotia bought 12,400 from Nesbitt at 27.15, then crossed 25,000 at the same price. TD crossed 34,300 at the same price again.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 27.16
Bid-YTW : 2.54 %
ENB.PR.F FixedReset 68,461 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-31
Maturity Price : 23.21
Evaluated at bid price : 25.36
Bid-YTW : 3.66 %
BNS.PR.N Deemed-Retractible 60,810 TD crossed 50,000 at 26.72.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-29
Maturity Price : 26.00
Evaluated at bid price : 26.73
Bid-YTW : 2.18 %
BNS.PR.Z FixedReset 58,196 TD crossed 22,000 at 25.515.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.10
Bid-YTW : 3.05 %
SLF.PR.H FixedReset 55,291 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.05
Bid-YTW : 4.20 %
CM.PR.I Deemed-Retractible 46,966 Called for redemption.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-01-31
Maturity Price : 25.25
Evaluated at bid price : 25.98
Bid-YTW : 3.65 %
There were 38 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TD.PR.O Deemed-Retractible Quote: 25.95 – 26.19
Spot Rate : 0.2400
Average : 0.1422

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-03-01
Maturity Price : 25.75
Evaluated at bid price : 25.95
Bid-YTW : -4.82 %

SLF.PR.H FixedReset Quote: 24.05 – 24.30
Spot Rate : 0.2500
Average : 0.1695

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.05
Bid-YTW : 4.20 %

ENB.PR.A Perpetual-Premium Quote: 26.40 – 26.65
Spot Rate : 0.2500
Average : 0.1782

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-03-01
Maturity Price : 25.00
Evaluated at bid price : 26.40
Bid-YTW : -44.06 %

PWF.PR.L Perpetual-Premium Quote: 25.30 – 25.56
Spot Rate : 0.2600
Average : 0.2022

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-31
Maturity Price : 25.25
Evaluated at bid price : 25.30
Bid-YTW : 5.00 %

BMO.PR.N FixedReset Quote: 27.08 – 27.22
Spot Rate : 0.1400
Average : 0.0870

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-25
Maturity Price : 25.00
Evaluated at bid price : 27.08
Bid-YTW : 2.17 %

MFC.PR.C Deemed-Retractible Quote: 23.21 – 23.48
Spot Rate : 0.2700
Average : 0.2178

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.21
Bid-YTW : 5.54 %

CFS.PR.A to Mature on Schedule

Tuesday, January 31st, 2012

On January 6, Connor, Clark & Lunn Capital Markets Inc. announced:

that that CANADIAN Financials & Utilities Split Corp. (the “Company”) will redeem its Preferred Shares and Class A Shares as scheduled on January 31, 2012 (the “Maturity Date”).

The redemption price payable by the Company for a Preferred Share will be equal to the lesser of (i) $10.00 plus any accrued and unpaid distributions in respect of the Preferred Shares, and (ii) the NAV of the Company on that date divided by the number of Preferred Shares then outstanding.

The redemption price payable by the Company for a Class A Share on that date will be equal to the greater of (i) the NAV per Unit on that date minus the sum of $10.00 plus any accrued and unpaid distributions on the Preferred Shares, and (ii) nil. One Unit means one Preferred Share and one Class A Share.

As at December 31, 2011, the NAV per Unit of the Company was estimated to be $15.33, which equates to $5.33 per Class A Share and $10.00 per Preferred Share.

The Company’s Preferred Shares and Class A Shares are listed on the TSX under the symbols CFS.PR.A and CFS, respectively.

This was a tiny little issue with less than 1-million shares outstanding. It was added to the HIMIPref™ database because I really liked the credit quality when the issue was announced – but alas, the sponsor was unable to sell enough of them to make the effort worthwhile.

Rating discontinued by DBRS.

January 30, 2012

Tuesday, January 31st, 2012

Greece is kicking against the pricks:

European leaders sparred with Greece over a second rescue program, clouding progress toward a permanent aid fund and tougher budget rules designed to stabilize the euro.

Greece faced criticism that its economic makeover is faltering, and it fended off German and Dutch calls for a European overseer to take command of its budget after its deficits surpassed targets for two years.

Greece is making progress on one component of the package, nearing an agreement for bondholders to accept deeper losses on a 50 percent cut in the face value of more than 200 billion euros of debt.

European concerns that Greece can deliver budget cuts and economic reforms are holding up other parts of the package, which Greece needs to meet a 14.5 billion-euro bond payment due on March 20.

However, it is beginning to dawn on the Europeans that when the party’s over, somebody has to pay the bills:

Euro leaders left a Brussels summit late yesterday with no accord over how to plug Greece’s widening budget hole and German Chancellor Angela Merkel voicing frustration with the Athens government’s failure to carry out an economic makeover.

“Greece’s debt sustainability is especially bad,” Merkel told reporters. “You have to find a way through more action by the Greek government, more contributions by private creditors, for example, in order to close this gap.”

DBRS downgraded Portugal:

DBRS, Inc. (DBRS) has downgraded the Republic of Portugal’s long-term foreign and local currency debt to BBB (low) from BBB. The trend on both ratings remains Negative. The downgrade reflects weaker growth prospects in Portugal, which are likely to make achieving ambitious deficit-reduction targets very challenging. Moreover, the unstable economic environment in Europe, uncertainty over the Greek debt exchange, and ongoing tensions in financial markets intensify downside risks to Portugal’s growth outlook and prospects for debt stabilisation.

The Negative trends reflect our assessment that the ratings have yet to stabilise and that further deterioration in the growth or fiscal outlook could result in a further ratings downgrade. Growth prospects are particularly important to debt stabilisation in Portugal, given the size of the fiscal consolidation programme and the high and rising public debt burden.

The outlook for the Portuguese economy has deteriorated since DBRS’s last review in October 2011. The Bank of Portugal estimates that the economy will contract by 3.1% in 2012 – the second consecutive year of recession – and expand by just 0.3% in 2013.

It is not clear when Portugal will be able to reenter the long-term debt markets. According to the EU-IMF programme, Portugal is expected to return to the markets in time to cover a EUR 9.7 billion bond redemption in September 2013.

Sarkozy had some good news for the City:

France plans to unilaterally impose a 0.1 percent tax on financial transactions starting in August, President Nicolas Sarkozy said, brushing aside opposition from the nation’s banks.

“What we want to do is provoke a shock, to set an example,” Sarkozy said late yesterday on French television from Paris. “There’s no reason why deregulated finance, which brought us to the current situation, can’t participate in the restoration of our accounts.”

A France-only levy is opposed by the country’s financial community and its feasibility has been questioned by the Bank of France.

The financial transactions tax is among measures Sarkozy unveiled to shrink the French budget deficit and spur growth. He’s also increasing sales taxes and levies on financial incomes to fund a 13 billion-euro cut in payroll charges aimed at reducing labor costs and making France more competitive.

S&P downgraded Encana, which has no preferreds outstanding:

  • On Jan. 18, 2012, Standard & Poor’s revised its natural gas price assumptions following a decline in spot and forward North American natural gas prices. Notably, we lowered our long-term price assumptions based on our view that although prices will likely stabilize or modestly
    improve in 2012 due to production curtailment, fundamental supply characteristics will constrain pricing.
  • As a result, we are lowering our long-term corporate credit and senior unsecured debt ratings on Calgary, Alta.-based Encana Corp. to ‘BBB’ from ‘BBB+’.
  • We are also lowering our senior unsecured debt rating on subsidiary Encana Holdings Finance Corp. to ‘BBB’ from ‘BBB+’.
  • We are affirming our ‘A-2’ Canada scale commercial paper rating on Encana.
  • The ratings reflect our assessment of the company’s strong internal growth prospects from its large reserve base and undeveloped land holdings, low operating-cost structure, and strong liquidity.
  • The stable outlook reflects our view that Encana’s cash flow from asset sales combined with its increasing liquids production while maintaining competitive operating costs will allow the company to maintain its funds from operations-to-debt at more than 30% through 2013.

It was another mixed day for the Canadian preferred share market as PerpetualDiscounts – those few that are left – continue to bounce around like mad. PerpetualDiscounts won 66bp, FixedResets gained 8bp and DeemedRetractibles were down 3bp. Volatility was skewed to the upside. Volume was average.

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 0.7328 % 2,389.0
FixedFloater 4.69 % 4.06 % 41,901 17.27 1 0.3469 % 3,323.9
Floater 2.79 % 2.96 % 63,143 19.81 3 0.7328 % 2,579.5
OpRet 4.90 % 0.42 % 67,093 1.29 7 0.4912 % 2,521.2
SplitShare 5.33 % -0.39 % 72,758 0.86 4 -0.2956 % 2,626.1
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.4912 % 2,305.4
Perpetual-Premium 5.40 % -5.12 % 101,778 0.09 23 0.0506 % 2,213.9
Perpetual-Discount 4.96 % 4.93 % 181,383 14.82 7 0.6558 % 2,442.8
FixedReset 5.04 % 2.69 % 209,811 2.33 65 0.0779 % 2,385.2
Deemed-Retractible 4.90 % 3.50 % 205,499 1.68 46 -0.0276 % 2,308.9
Performance Highlights
Issue Index Change Notes
BNA.PR.D SplitShare -1.16 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-02-29
Maturity Price : 26.00
Evaluated at bid price : 26.50
Bid-YTW : -3.79 %
FTS.PR.E OpRet 1.14 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 27.44
Bid-YTW : 0.42 %
ELF.PR.F Perpetual-Discount 1.15 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-30
Maturity Price : 24.48
Evaluated at bid price : 24.71
Bid-YTW : 5.40 %
BAM.PR.K Floater 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-30
Maturity Price : 17.44
Evaluated at bid price : 17.44
Bid-YTW : 3.03 %
BMO.PR.Q FixedReset 1.31 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.64
Bid-YTW : 2.82 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.O Deemed-Retractible 70,711 Nesbitt crossed blocks of 18,000 and 30,000, both at 27.13. Desjardins bought 15,900 from TD at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-04-26
Maturity Price : 26.00
Evaluated at bid price : 27.14
Bid-YTW : 1.77 %
RY.PR.F Deemed-Retractible 66,792 TD crossed blocks of 22,100 and 27,500, both at 25.79.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-05-24
Maturity Price : 25.25
Evaluated at bid price : 25.78
Bid-YTW : 3.65 %
RY.PR.E Deemed-Retractible 53,675 Desjardins crossed 23,400 at 25.85; TD crossed 20,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-02-24
Maturity Price : 25.25
Evaluated at bid price : 25.83
Bid-YTW : 3.58 %
GWO.PR.M Deemed-Retractible 39,360 Nesbitt crossed 30,000 at 26.70.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-03-31
Maturity Price : 26.00
Evaluated at bid price : 26.60
Bid-YTW : 4.97 %
PWF.PR.L Perpetual-Premium 37,504 Nesbitt crossed 18,000 at 25.20; RBC crossed 13,800 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-31
Maturity Price : 25.25
Evaluated at bid price : 25.32
Bid-YTW : 4.97 %
HSE.PR.A FixedReset 30,771 RBC crossed 19,900 at 25.95.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-30
Maturity Price : 23.52
Evaluated at bid price : 25.95
Bid-YTW : 2.99 %
There were 32 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
FTS.PR.C OpRet Quote: 26.25 – 27.25
Spot Rate : 1.0000
Average : 0.6650

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-02-29
Maturity Price : 25.50
Evaluated at bid price : 26.25
Bid-YTW : -18.46 %

PWF.PR.A Floater Quote: 21.10 – 22.10
Spot Rate : 1.0000
Average : 0.8620

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-30
Maturity Price : 21.10
Evaluated at bid price : 21.10
Bid-YTW : 2.48 %

BNA.PR.D SplitShare Quote: 26.50 – 26.90
Spot Rate : 0.4000
Average : 0.2641

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-02-29
Maturity Price : 26.00
Evaluated at bid price : 26.50
Bid-YTW : -3.79 %

BMO.PR.H Deemed-Retractible Quote: 25.76 – 26.04
Spot Rate : 0.2800
Average : 0.1685

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-02-25
Maturity Price : 25.00
Evaluated at bid price : 25.76
Bid-YTW : 2.08 %

BNS.PR.M Deemed-Retractible Quote: 26.17 – 26.44
Spot Rate : 0.2700
Average : 0.1942

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-07-27
Maturity Price : 26.00
Evaluated at bid price : 26.17
Bid-YTW : 2.97 %

TCA.PR.Y Perpetual-Premium Quote: 52.10 – 52.55
Spot Rate : 0.4500
Average : 0.3777

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-05
Maturity Price : 50.00
Evaluated at bid price : 52.10
Bid-YTW : 3.51 %

January 27, 2012

Friday, January 27th, 2012

There is some indication that the Europeans are beginning to realize that their voluntary debt exchange idea is stupid:

Opposition to payouts on Greek credit-default swaps from European Union policy makers is softening as disputes over a voluntary debt exchange threaten to push the nation into default.

Any agreement between the Greek government and the Washington-based Institute of International Finance on debt writedowns will only bind 50 percent of investors in the 206 billion euros ($270 billion) of notes being negotiated, Barclays Capital estimates. Hedge funds may resist a deal, seeking to get paid in full or compensated from insurance contracts.

“Politicians seem less concerned than before about CDS triggers,” said Michael Hampden-Turner, a credit strategist at Citigroup Inc. in London. “Having a payout on Greek CDS is probably better than the alternative: a loss in market faith of the product’s ability to provide a hedge against sovereign risk.”

Officials, including former European Central Bank President Jean-Claude Trichet, have insisted that a swaps trigger was unacceptable because traders would be encouraged to bet against indebted nations and worsen the crisis.

Fitch is not impressed:

Spain, Italy, Belgium, Cyprus and Slovenia had their debt ratings cut by Fitch Ratings, which said these nations do not accure [sic] “the full benefits of the euro’s reserve currency status.”

Ireland had its ratings affirmed by Fitch. The outlook on all six nations is negative.

But fear not! Soon credit rating agencies in Canada will have a lot more forms to fill out and boxes to tick and regulatory employment will increase so everything will be fine!

Canadian securities regulators are preparing to impose new rules on agencies that assess the creditworthiness of the millions of dollars in debt issued by corporations, governments and other instructions.

The Canadian Securities Administrators said Friday that credit ratings agencies in this country who want their opinions to be eligible for use under securities laws will need to apply to become a “designated rating organization.”

The Volcker Rule continues re-shuffle the deck:

Citigroup Inc. (C), the third-biggest U.S. lender, will close a proprietary-trading desk that makes bets with the firm’s own money and most of the unit’s staff will leave before rules banning the practice take effect.

Citigroup is shutting the Equity Principal Strategies business and most staff will leave the bank after Feb. 6, according to a memo by Derek Bandeen, head of equities for the New York-based bank, and obtained by Bloomberg News.

“Pursuant to various regulatory initiatives and changes, we have made the strategic decision to exit the Principal Strategies business,” Bandeen said in the memo. “The team, led by Sutesh Sharma, have been aware of this for some time and have worked diligently to wind down the positions over the last few months.”

Sharma intends to form a hedge fund, two people familiar with the matter said in August. His Citigroup team managed about $2 billion, one of the people said.

It was another mixed day for the Canadian preferred share market, as the (relatively tiny) PerpetualDiscounts index shot ahead 54bp, FixedResets lost 6bp and DeemedRetractibles gained 9bp. Volatility was good, skewed to the upside; volume was above average.

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 0.5933 % 2,371.6
FixedFloater 4.71 % 4.08 % 42,119 17.25 1 0.5982 % 3,312.4
Floater 2.82 % 2.98 % 63,870 19.77 3 0.5933 % 2,560.7
OpRet 4.93 % 1.29 % 69,731 1.30 7 0.0601 % 2,508.9
SplitShare 5.31 % -0.28 % 70,419 0.87 4 -0.3196 % 2,633.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0601 % 2,294.1
Perpetual-Premium 5.41 % -5.67 % 94,185 0.09 23 0.0498 % 2,212.8
Perpetual-Discount 4.99 % 4.98 % 180,463 15.50 7 0.5416 % 2,426.9
FixedReset 5.03 % 2.74 % 211,302 2.34 65 -0.0562 % 2,383.3
Deemed-Retractible 4.89 % 3.56 % 202,525 1.68 46 0.0889 % 2,309.6
Performance Highlights
Issue Index Change Notes
BAM.PR.R FixedReset -1.92 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-27
Maturity Price : 23.51
Evaluated at bid price : 26.04
Bid-YTW : 3.78 %
BNA.PR.E SplitShare -1.18 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 24.31
Bid-YTW : 5.58 %
RY.PR.A Deemed-Retractible 1.03 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-05-24
Maturity Price : 25.00
Evaluated at bid price : 25.57
Bid-YTW : 3.63 %
ELF.PR.G Perpetual-Discount 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-27
Maturity Price : 22.60
Evaluated at bid price : 23.00
Bid-YTW : 5.18 %
PWF.PR.A Floater 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-27
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 2.49 %
BAM.PR.J OpRet 1.31 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-31
Maturity Price : 26.00
Evaluated at bid price : 27.16
Bid-YTW : 3.25 %
POW.PR.D Perpetual-Discount 1.66 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.07
Bid-YTW : 4.99 %
Volume Highlights
Issue Index Shares
Traded
Notes
GWO.PR.G Deemed-Retractible 78,380 Nesbitt crossed 60,000 at 25.25.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.26
Bid-YTW : 4.86 %
RY.PR.A Deemed-Retractible 63,595 Desjardins crossed 25,000 at 25.57.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-05-24
Maturity Price : 25.00
Evaluated at bid price : 25.57
Bid-YTW : 3.63 %
MFC.PR.B Deemed-Retractible 58,743 Nesbitt crossed 50,000 at 23.95.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.80
Bid-YTW : 5.37 %
BNS.PR.N Deemed-Retractible 54,015 TD crossed 50,000 at 26.71.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-29
Maturity Price : 26.00
Evaluated at bid price : 26.68
Bid-YTW : 2.35 %
PWF.PR.F Perpetual-Premium 52,900 TD crossed 49,900 at 25.42.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-02-26
Maturity Price : 25.00
Evaluated at bid price : 25.35
Bid-YTW : -12.17 %
HSB.PR.D Deemed-Retractible 33,000 TD crossed 30,000 at 25.65.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.25
Evaluated at bid price : 25.66
Bid-YTW : 4.28 %
There were 37 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
PWF.PR.A Floater Quote: 21.00 – 22.10
Spot Rate : 1.1000
Average : 0.7107

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-27
Maturity Price : 21.00
Evaluated at bid price : 21.00
Bid-YTW : 2.49 %

BAM.PR.R FixedReset Quote: 26.04 – 26.67
Spot Rate : 0.6300
Average : 0.4015

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-27
Maturity Price : 23.51
Evaluated at bid price : 26.04
Bid-YTW : 3.78 %

BAM.PR.I OpRet Quote: 25.52 – 25.99
Spot Rate : 0.4700
Average : 0.3172

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-02-26
Maturity Price : 25.25
Evaluated at bid price : 25.52
Bid-YTW : -2.63 %

ENB.PR.B FixedReset Quote: 25.72 – 25.99
Spot Rate : 0.2700
Average : 0.1586

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-27
Maturity Price : 23.36
Evaluated at bid price : 25.72
Bid-YTW : 3.67 %

BAM.PR.O OpRet Quote: 26.10 – 26.49
Spot Rate : 0.3900
Average : 0.2812

YTW SCENARIO
Maturity Type : Option Certainty
Maturity Date : 2013-06-30
Maturity Price : 25.00
Evaluated at bid price : 26.10
Bid-YTW : 2.12 %

BNA.PR.E SplitShare Quote: 24.31 – 24.70
Spot Rate : 0.3900
Average : 0.2889

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 24.31
Bid-YTW : 5.58 %

January 26, 2012

Thursday, January 26th, 2012

All I can say is: it’s about time:

The federal government says it is abandoning plans to create a national securities regulator following a stinging courtroom defeat.

Finance Minister Jim Flaherty on Thursday delivered his most elaborate public reaction since last month’s critical ruling by the Supreme Court of Canada.

Mr. Flaherty told The Canadian Press that he recognizes that the day-to-day regulation of financial markets is a provincial responsibility — as determined by the high court.

Another bank is going to limit cash bonuses for investment bankers:

Bank of America Corp., the U.S. lender seeking to preserve capital, will freeze base salary levels and limit cash bonuses to $150,000 for some investment bankers, said two people with knowledge of the plans.

The cap on cash payments applies to those getting as much as $1 million in total year-end bonuses, with the rest coming in shares of the Charlotte, North Carolina-based lender, said the people, who asked for anonymity because the matter is private. Employees are being told of their payments today and can sell some of the stock starting on Feb. 15, the people said.

So my question is: when we will see the first public offering underwritten by a hedge fund? A hedge fund based in Singapore? But at the moment, the mood among investment bankers leans to fear more than greed:

In London, with financial sector jobs on the chopping block, bankers lucky enough to have a job are staying put even if they are dismayed when they hear about their bonus.

A new survey of almost 1,400 bankers and fund employees shows that far fewer employees are likely to try to swap jobs if they don’t like their bonuses. The research, done by recruiting firm Astbury Marsden, found that only one-third of workers in London who were surveyed said they would seek a new job. A year ago, the figure was 48 per cent.

They are facing a job market where finding a new spot is tough. According to the firm’s earlier research, competition for roles is rising fast. In 2011, there were 3.16 qualified candidates for financial job in London, up from 2.17 in 2010.

Such figures are likely to embolden bank bosses as they face political and shareholder pressure to cut bonuses. The usual threat of “cut my bonus and I leave” is a lot less threatening in a market where jobs are disappearing.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts down 21bp, FixedResets gaining 5bp and DeemedRetractibles up 1bp. There was a lengthy list of volatile issues, with a preponderance losers but no clear pattern. Volume was high.

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 -0.1616 % 2,357.6
FixedFloater 4.74 % 4.11 % 42,213 17.20 1 -1.9071 % 3,292.7
Floater 2.83 % 3.00 % 64,354 19.73 3 -0.1616 % 2,545.6
OpRet 4.93 % 1.78 % 69,330 1.30 7 0.2848 % 2,507.4
SplitShare 5.29 % -0.28 % 68,336 0.87 4 0.0400 % 2,642.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.2848 % 2,292.7
Perpetual-Premium 5.41 % -3.97 % 87,162 0.09 23 -0.0228 % 2,211.7
Perpetual-Discount 5.02 % 5.00 % 180,340 15.48 7 -0.2115 % 2,413.8
FixedReset 5.03 % 2.70 % 213,509 2.34 65 0.0462 % 2,384.7
Deemed-Retractible 4.90 % 3.51 % 205,061 1.69 46 0.0102 % 2,307.5
Performance Highlights
Issue Index Change Notes
CIU.PR.B FixedReset -2.13 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-01
Maturity Price : 25.00
Evaluated at bid price : 27.10
Bid-YTW : 3.44 %
BAM.PR.G FixedFloater -1.91 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-26
Maturity Price : 21.37
Evaluated at bid price : 20.06
Bid-YTW : 4.11 %
POW.PR.D Perpetual-Discount -1.44 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-26
Maturity Price : 24.16
Evaluated at bid price : 24.66
Bid-YTW : 5.08 %
RY.PR.A Deemed-Retractible -1.40 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-05-24
Maturity Price : 25.25
Evaluated at bid price : 25.31
Bid-YTW : 4.16 %
NA.PR.M Deemed-Retractible -1.33 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-15
Maturity Price : 26.00
Evaluated at bid price : 26.70
Bid-YTW : 3.40 %
BAM.PR.O OpRet 1.04 % YTW SCENARIO
Maturity Type : Option Certainty
Maturity Date : 2013-06-30
Maturity Price : 25.00
Evaluated at bid price : 26.18
Bid-YTW : 1.89 %
RY.PR.B Deemed-Retractible 1.31 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-02-25
Maturity Price : 26.00
Evaluated at bid price : 26.30
Bid-YTW : -13.35 %
BAM.PR.P FixedReset 1.50 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-30
Maturity Price : 25.00
Evaluated at bid price : 27.66
Bid-YTW : 3.05 %
Volume Highlights
Issue Index Shares
Traded
Notes
GWO.PR.J FixedReset 213,900 Nesbitt crossed 100,000 at 26.80 RBC crossed 112,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.75
Bid-YTW : 2.50 %
CM.PR.I Deemed-Retractible 205,252 Called for redemption.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-31
Maturity Price : 25.75
Evaluated at bid price : 25.99
Bid-YTW : 3.57 %
CM.PR.L FixedReset 110,149 Scotia crossed blocks of 15,000 shares, 29,900 and 19,400, all at 27.15. Desjardins crossed 30,000 at the same price; TD crossed 12,600 at the same price again.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 27.15
Bid-YTW : 2.54 %
RY.PR.H Deemed-Retractible 106,625 Nesbitt crossed 50,000 at 26.90, then sold 16,400 to TD at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-24
Maturity Price : 26.00
Evaluated at bid price : 26.91
Bid-YTW : 2.41 %
ENB.PR.D FixedReset 83,920 Nesbitt crossed blocks of 20,000 and 60,000, both at 25.55.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-26
Maturity Price : 23.28
Evaluated at bid price : 25.57
Bid-YTW : 3.65 %
CM.PR.K FixedReset 83,339 Desjardins crossd 29,500 at 26.79; Scotia crossed 20,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 26.69
Bid-YTW : 2.54 %
There were 47 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
CIU.PR.B FixedReset Quote: 27.10 – 27.80
Spot Rate : 0.7000
Average : 0.4818

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-01
Maturity Price : 25.00
Evaluated at bid price : 27.10
Bid-YTW : 3.44 %

FTS.PR.E OpRet Quote: 26.96 – 27.59
Spot Rate : 0.6300
Average : 0.4131

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-06-01
Maturity Price : 25.75
Evaluated at bid price : 26.96
Bid-YTW : 1.78 %

BAM.PR.G FixedFloater Quote: 20.06 – 20.49
Spot Rate : 0.4300
Average : 0.2891

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-26
Maturity Price : 21.37
Evaluated at bid price : 20.06
Bid-YTW : 4.11 %

NA.PR.O FixedReset Quote: 27.34 – 27.69
Spot Rate : 0.3500
Average : 0.2192

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-15
Maturity Price : 25.00
Evaluated at bid price : 27.34
Bid-YTW : 1.78 %

NA.PR.M Deemed-Retractible Quote: 26.70 – 27.05
Spot Rate : 0.3500
Average : 0.2381

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-05-15
Maturity Price : 26.00
Evaluated at bid price : 26.70
Bid-YTW : 3.40 %

RY.PR.L FixedReset Quote: 26.32 – 26.58
Spot Rate : 0.2600
Average : 0.1687

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 26.32
Bid-YTW : 2.77 %

LFE.PR.A: DBRS Downgrades to Pfd-4(low)

Thursday, January 26th, 2012

DBRS has announced:

has today downgraded the rating of the Preferred Shares issued by Canadian Life Companies Split Corp. (the Company) to Pfd-4 (low) from Pfd-3 (low).

In April 2003, the Company issued 8.2 million Preferred Shares (at $10 each) and an equal number of Class A Shares (at $15 each). The termination date for both classes of shares issued is December 1, 2012.

The Company holds a portfolio consisting primarily of common shares of the four largest publicly traded Canadian life insurance companies: Manulife Financial Corporation, Sun Life Financial Inc., Great-West Lifeco Inc., and Industrial Alliance Insurance and Financial Services Inc. (each a Portfolio Company and collectively, the Portfolio). Each Portfolio Company generally represents no less than 10% and no more than 30% of the net asset value (NAV) of the Portfolio. Up to 20% of the net asset value (NAV) of the Company may be invested in equity securities of foreign life insurance companies or other Canadian or foreign financial services corporations other than the Portfolio Companies. The Portfolio is actively managed by Quadravest Capital Management Inc.

The Preferred Shares pay a fixed cumulative monthly dividend of $0.04375 per Preferred Share, yielding 5.25% annually on their issue price of $10 per share. Holders of the Class A Shares are expected to receive regular monthly targeted cash distributions of $0.10 per Class A Share, yielding 8% annually on their issue price of $15 per share. However, these Class A Share distributions have been suspended since May 31, 2011, due to the NAV per Unit falling below the $15 threshold. In addition, no special year-end dividends will be paid if, after such payment, the NAV of the Portfolio would be less than $25.

On September 6, 2011, DBRS confirmed the ratings on the Preferred Shares at Pfd-3 (low) due to the sufficient level of downside protection at the time. However, over the past few months, the NAV of the Portfolio has experienced significant decline, due to the negative performance of Canadian life insurance companies over the previous quarter. The downside protection available to the Preferred Shares has fallen from 23.3% on August 31, 2011, to 8.5% on December 30, 2011, and stands at 12.05% as of January 13, 2012. As a result of the downside protection dropping below acceptable levels for a sustained period of time, the rating has been downgraded to Pfd-4 (low).

The scheduled final maturity date of the Preferred Shares is December 1, 2012. DBRS will continue to closely monitor changes in the credit quality of the Preferred Shares and provide rating updates as required.

It’s about time! The NAV was 11.37 as of January 13.

LFE.PR.A was last mentioned on PrefBlog when their warrants expired out of the money in October 2010. LFE.PR.A is tracked by HIMIPref™ but is relegated to the Scraps index on credit concerns.

January 25, 2012

Thursday, January 26th, 2012

The FOMC release was fascinating:

To support a stronger economic recovery and to help ensure that inflation, over time, is at levels consistent with the dual mandate, the Committee expects to maintain a highly accommodative stance for monetary policy. In particular, the Committee decided today to keep the target range for the federal funds rate at 0 to 1/4 percent and currently anticipates that economic conditions–including low rates of resource utilization and a subdued outlook for inflation over the medium run–are likely to warrant exceptionally low levels for the federal funds rate at least through late 2014.

The Committee also decided to continue its program to extend the average maturity of its holdings of securities as announced in September. The Committee is maintaining its existing policies of reinvesting principal payments from its holdings of agency debt and agency mortgage-backed securities in agency mortgage-backed securities and of rolling over maturing Treasury securities at auction.

Equities liked the news:

The Fed extended its previous pledge to keep rates low at least until the middle of 2013 as inflation remains tame and more than two years of economic growth have failed to push unemployment below 8.5 percent. Some Fed officials have said further easing might be needed to put more Americans back to work and revive the housing market.

Stocks erased losses and Treasuries extended gains after the statement. The Standard & Poor’s 500 Index rose 0.1 percent to 1,315.66 at 12:34 p.m. in New York. The yield on the 10-year Treasury note fell to 1.98 percent from 2.06 percent late yesterday.

It was a mixed day for the Canadian preferred share market, with PerpetualDiscounts gaining 11bp, FixedResets down 12bp and DeemedRetractibles losing 16bp. The longer than usual Performance Highlights table was nearly all losers, most notably recent big gainers. Volume was above average.

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 -0.8189 % 2,361.5
FixedFloater 4.65 % 4.01 % 41,675 17.36 1 0.7389 % 3,356.7
Floater 2.83 % 3.01 % 66,508 19.69 3 -0.8189 % 2,549.7
OpRet 4.94 % 1.66 % 64,185 1.30 7 -0.2077 % 2,500.2
SplitShare 5.30 % -0.28 % 67,885 0.87 4 0.1752 % 2,641.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2077 % 2,286.2
Perpetual-Premium 5.41 % -8.81 % 86,120 0.09 23 0.0110 % 2,212.2
Perpetual-Discount 5.01 % 4.99 % 168,894 15.49 7 0.1059 % 2,418.9
FixedReset 5.03 % 2.70 % 208,895 2.34 65 -0.1227 % 2,383.6
Deemed-Retractible 4.90 % 3.49 % 199,065 1.45 46 -0.1623 % 2,307.3
Performance Highlights
Issue Index Change Notes
SLF.PR.H FixedReset -1.97 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.90
Bid-YTW : 4.35 %
BAM.PR.K Floater -1.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-25
Maturity Price : 17.37
Evaluated at bid price : 17.37
Bid-YTW : 3.04 %
IAG.PR.C FixedReset -1.41 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.59
Bid-YTW : 3.03 %
SLF.PR.E Deemed-Retractible -1.29 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.90
Bid-YTW : 5.68 %
BAM.PR.B Floater -1.24 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-25
Maturity Price : 17.53
Evaluated at bid price : 17.53
Bid-YTW : 3.01 %
SLF.PR.C Deemed-Retractible -1.22 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.71
Bid-YTW : 5.74 %
BAM.PR.T FixedReset -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-25
Maturity Price : 23.29
Evaluated at bid price : 25.43
Bid-YTW : 3.74 %
PWF.PR.E Perpetual-Premium 1.41 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.97
Bid-YTW : 1.55 %
Volume Highlights
Issue Index Shares
Traded
Notes
CM.PR.M FixedReset 527,118 Block city! RBC crossed blocks of 10,000 and 75,000, both at 27.30. Nesbitt crossed 165,000 and 140,000 at the same price. Nesbitt sold four blocks to RBC, 23,200 shares, 51,800 shares, 25,000 and 30,000, all at the same price again.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 27.30
Bid-YTW : 2.68 %
CM.PR.I Deemed-Retractible 219,448 Called for redemption.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-31
Maturity Price : 25.75
Evaluated at bid price : 25.99
Bid-YTW : 3.56 %
ENB.PR.F FixedReset 128,914 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-25
Maturity Price : 23.19
Evaluated at bid price : 25.30
Bid-YTW : 3.78 %
BAM.PR.P FixedReset 80,032 Nesbitt crossed 75,000 at 27.23.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-09-30
Maturity Price : 25.00
Evaluated at bid price : 27.25
Bid-YTW : 3.67 %
SLF.PR.I FixedReset 74,640 Scotia crossed 16,000 at 25.00.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 24.99
Bid-YTW : 4.33 %
HSB.PR.D Deemed-Retractible 52,900 Desjardins crossed 22,000 at 25.68 and bought 13,200 from TD at 25.64.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.25
Evaluated at bid price : 25.60
Bid-YTW : 4.40 %
There were 45 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
ELF.PR.G Perpetual-Discount Quote: 22.72 – 23.60
Spot Rate : 0.8800
Average : 0.6230

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-25
Maturity Price : 22.36
Evaluated at bid price : 22.72
Bid-YTW : 5.25 %

SLF.PR.H FixedReset Quote: 23.90 – 24.25
Spot Rate : 0.3500
Average : 0.2383

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.90
Bid-YTW : 4.35 %

TD.PR.C FixedReset Quote: 26.34 – 26.60
Spot Rate : 0.2600
Average : 0.1575

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.34
Bid-YTW : 2.82 %

CU.PR.C FixedReset Quote: 25.80 – 26.15
Spot Rate : 0.3500
Average : 0.2521

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-01
Maturity Price : 25.00
Evaluated at bid price : 25.80
Bid-YTW : 3.48 %

FTS.PR.H FixedReset Quote: 25.72 – 26.00
Spot Rate : 0.2800
Average : 0.1889

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-25
Maturity Price : 23.55
Evaluated at bid price : 25.72
Bid-YTW : 2.85 %

MFC.PR.C Deemed-Retractible Quote: 23.12 – 23.40
Spot Rate : 0.2800
Average : 0.2012

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.12
Bid-YTW : 5.58 %

BAM Shuffles More Assets Down the Line

Wednesday, January 25th, 2012

Brookfield Asset Management has engaged in a very familiar transaction – shuffling assets down the line:

Brookfield Renewable Energy Partners L.P. (“Brookfield Renewable”) (TSX: BEP.UN) and Brookfield Asset Management (“Brookfield”) (TSX: BAM.A, NYSE: BAM) today announced a bought-deal secondary offering with a syndicate of underwriters led by Scotia Capital Inc. and TD Securities Inc., through which a wholly-owned subsidiary of Brookfield has agreed to sell 11,430,000 L.P. units of Brookfield Renewable at an offering price of $26.25 per L.P. unit. The Underwriters have been granted an over-allotment option to purchase up to an additional 1,714,500 L.P. units from Brookfield at the offering price, under the same terms, exercisable for a period of 30 days from closing of the Offering.

Brookfield currently owns approximately 73% of Brookfield Renewable on a fully-exchanged basis. Upon the completion of the offering, but before giving effect to the over-allotment option, it is anticipated that Brookfield will own, directly and indirectly, 179,465,109 L.P. units, representing approximately 68% of Brookfield Renewable on a fully-exchanged basis.

Boyd Ermann of the Globe & Mail comments:

Brookfield Asset’s cash hoard will increase by about 18 per cent after it takes in the proceeds of the sale. As of the end of the third quarter, Brookfield Asset listed cash and financial assets of $1.7-billion (U.S.).

Look for the money to head across the Atlantic. On the company’s last quarterly conference call, chief executive officer Bruce Flatt said Brookfield expects “to find opportunities to acquire international assets from European companies which are endeavoring to deleverage their balance sheets, and we’re working with a number of excellent companies to assist them in this regard.”

BAM has issued a host of preferreds: BAM.PR.B, BAM.PR.E, BAM.PR.G, BAM.PR.H, BAM.PR.I, BAM.PR.J, BAM.PR.K, BAM.PR.M, BAM.PR.N, BAM.PR.O, BAM.PR.P, BAM.PR.R, BAM.PR.T, BAM.PR.X and BAM.PR.Z are all tracked by HIMIPref™.

SLS.PR.A Downgraded to Pfd-5 by DBRS

Wednesday, January 25th, 2012

DBRS has announced that it:

has today downgraded the rating of the Preferred Shares issued by SL Split Corp. (the Company) to Pfd-5 from Pfd-4 (low).

In November 2007, the Company issued 1.055 million Preferred Shares (at $25.78 each) and 2.11 million Capital Shares (at $15.26 each), raising gross proceeds of $59.4 million. The termination date for both classes of shares issued is January 31, 2013.

The Company holds a portfolio consisting of common shares of Sun Life Financial Inc. (Sun Life). Dividends received from the portfolio are used to fund a fixed cumulative quarterly dividend to the holders of the Preferred Shares yielding 5% annually on their issue price of $25.78 per share. Holders of the Capital Shares are expected to receive all excess dividend income after Preferred Share distributions and Company expenses have been paid.

On September 6, 2011, DBRS confirmed the ratings on the Preferred Shares at Pfd-4 (low) due to the sufficient level of downside protection available at the time, despite the net asset value (NAV) and downside protection having gradually decreased in the months leading up to the confirmation. However, since the rating confirmation, the NAV has continued to decline, due to the negative performance of Canadian life insurance companies as a whole over the previous quarter, with the common shares of Sun Life in particular declining in value by 28.2% from $26.31 on September 1, 2011, to $18.90 on December 30, 2011. The downside protection available to the Preferred Shares has fallen from 1.7% on September 1, 2011, to -37.9% on December 30, 2011. As a result of the magnitude of the level of negative downside protection available to holders of the Preferred Shares and the overall negative trend observed since the previous rating action, the Preferred Shares have been downgraded to Pfd-5 from Pfd-4 (low).

The scheduled final maturity date of the Preferred Shares is January 31, 2013. DBRS will continue to closely monitor changes in the credit quality of the Preferred Shares and provide rating updates as required.

The NAVPU is now 20.38 to cover a preferred share obligation of 25.78, so the Asset Coverage Ratio is currently 0.8-:1. SLS.PR.A was last mentioned on PrefBlog when there was a small call for redemption in January 2011. SLS.PR.A is not tracked by HIMIPref™.

January 24, 2012

Wednesday, January 25th, 2012

The IMF has released the January 2012 Global Financial Stability Report:

Since the last Global Financial Stability Report (GFSR), risks to stability have increased, despite various policy steps to contain the euro area debt crisis and banking problems. European policymakers have outlined significant policy measures to address the medium-term issues contributing to the crisis, and some of these have helped to improve market sentiment, but sovereign financing remains challenging and downside risks remain. If funding challenges result in a round of deleveraging by banks, this could ignite an adverse feedback loop to euro area economies. The United States and other advanced economies are susceptible to spillovers from a potential intensification of the euro area crisis, and some have homegrown challenges to the removal of financial tail risks, including overcoming political obstacles to achieving an appropriate pace of fiscal consolidation. Developments in the euro area also threaten emerging Europe and may spill over to other emerging markets. Further policy actions are needed to restore market confidence. This effort will require building larger backstops for sovereign financing, assuring adequate bank funding and capital, and maintaining a sufficient flow of credit to the economy, possibly by establishing a “gatekeeper” charged with preventing disorderly bank deleveraging.

The euro area debt crisis has intensified further, requiring urgent action to prevent highly destabilizing outcomes.

That last sentence in the first paragraph is a good reason why I simply would not put any money into a European bank right now except as a total speculation; the politicization of European banking is getting intense. Can you imagine? If a bank wants to sell a wealth management unit, or halt lending in Greece, or something like that, they have to fill out a form and ask the regulator for permission? It may be good politics, but …

Cool graph:


Click for big

Extremely slow response from my websites today led me to learn a new command-line command: pathping

Tracing route to 2a.4b.5646.static.theplanet.com [70.86.75.42]

over a maximum of 30 hops:

0 j-7da53dda1cb54 [65.95.191.3]

1 bas2-toronto08_lo0_SYMP.net.bell.ca [64.230.200.160]

2 agg1-toronto12_4-3-0_100.net.bell.ca [64.230.58.190]

3 bx5-chicagodt_xe6-1-0.net.bell.ca [64.230.186.90]

4 te1-7.bbr01.eq01.chi01.networklayer.com [206.223.119.63]

5 ae20.bbr01.eq01.dal03.networklayer.com [173.192.18.136]

6 po31.dsr02.dllstx3.networklayer.com [173.192.18.227]

7 * * *

Computing statistics for 175 seconds…

Source to Here This Node/Link Hop RTT Lost/Sent = Pct Lost/Sent = Pct Address

0 j-7da53dda1cb54 [65.95.191.3] 0/ 100 = 0% |

1 11ms 0/ 100 = 0% 0/ 100 = 0% bas2-toronto08_lo0_SYMP.net.bell.ca [64.230.200.160] 0/ 100 = 0%

2 12ms 0/ 100 = 0% 0/ 100 = 0% agg1-toronto12_4-3-0_100.net.bell.ca [64.230.58.190] 0/ 100 = 0%

3 26ms 0/ 100 = 0% 0/ 100 = 0% bx5-chicagodt_xe6-1-0.net.bell.ca [64.230.186.90] 100/ 100 =100% |

4 – 100/ 100 =100% 0/ 100 = 0% te1-7.bbr01.eq01.chi01.networklayer.com [206.223.119.63]0/ 100 = 0%

5 – 100/ 100 =100% 0/ 100 = 0% ae20.bbr01.eq01.dal03.networklayer.com [173.192.18.136]0/100 = 0%

6 – 100/ 100 =100% 0/ 100 = 0% po31.dsr02.dllstx3.networklayer.com [173.192.18.227] 0/ 100 = 0%

7 – 100/ 100 =100% 0/ 100 = 0% j-7da53dda1cb54 [0.0.0.0] Trace complete.

Looks like Bell was having some major problems connecting with the world!

It was a very good day for the Canadian preferred share market, with PerpetualDiscounts winning 40bp, FixedResets gaining 15bp and DeemedRetractibles up 20bp. All entries on the Performance Highlights table are winners. Volume was average.

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 0.5910 % 2,381.0
FixedFloater 4.68 % 4.05 % 41,874 17.30 1 0.4950 % 3,332.1
Floater 2.80 % 2.97 % 66,969 19.79 3 0.5910 % 2,570.8
OpRet 4.93 % 1.15 % 64,752 1.31 7 0.1149 % 2,505.4
SplitShare 5.31 % 0.49 % 68,143 0.87 4 0.6245 % 2,636.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1149 % 2,291.0
Perpetual-Premium 5.41 % -9.44 % 86,004 0.09 23 -0.0108 % 2,211.9
Perpetual-Discount 5.01 % 4.99 % 163,344 15.49 7 0.4015 % 2,416.3
FixedReset 5.03 % 2.70 % 207,716 2.35 65 0.1512 % 2,386.5
Deemed-Retractible 4.89 % 3.32 % 200,243 1.29 46 0.1973 % 2,311.0
Performance Highlights
Issue Index Change Notes
SLF.PR.D Deemed-Retractible 1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.05
Bid-YTW : 5.54 %
SLF.PR.C Deemed-Retractible 1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.99
Bid-YTW : 5.58 %
GWO.PR.N FixedReset 1.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.32
Bid-YTW : 3.47 %
BAM.PR.B Floater 1.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-24
Maturity Price : 17.75
Evaluated at bid price : 17.75
Bid-YTW : 2.97 %
TRP.PR.A FixedReset 1.67 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.74
Bid-YTW : 2.26 %
BNA.PR.E SplitShare 2.07 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 24.60
Bid-YTW : 5.33 %
ELF.PR.G Perpetual-Discount 2.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-24
Maturity Price : 22.21
Evaluated at bid price : 22.51
Bid-YTW : 5.30 %
Volume Highlights
Issue Index Shares
Traded
Notes
ENB.PR.F FixedReset 344,331 Recent new issue.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-24
Maturity Price : 23.19
Evaluated at bid price : 25.29
Bid-YTW : 3.78 %
BAM.PR.R FixedReset 236,296 RBC crossed four blocks: 100,000 shares, 30,000 shares, 10,000 and 68,200, all at 26.20.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-01-24
Maturity Price : 23.55
Evaluated at bid price : 26.20
Bid-YTW : 3.75 %
SLF.PR.I FixedReset 96,723 TD bought 10,000 from anonymous, then crossed 11,900 at the same price.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.00
Bid-YTW : 4.32 %
TCA.PR.X Perpetual-Premium 83,551 Nesbitt crossed 80,000 at 52.00.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-10-15
Maturity Price : 50.00
Evaluated at bid price : 52.00
Bid-YTW : 3.16 %
SLF.PR.A Deemed-Retractible 78,953 Nesbitt crossed 62,100 at 23.90.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.95
Bid-YTW : 5.37 %
SLF.PR.D Deemed-Retractible 70,121 Nesbitt crossed 45,900 at 22.90.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.05
Bid-YTW : 5.54 %
There were 30 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
PWF.PR.E Perpetual-Premium Quote: 25.61 – 26.25
Spot Rate : 0.6400
Average : 0.4619

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.61
Bid-YTW : 2.96 %

IAG.PR.F Deemed-Retractible Quote: 26.27 – 26.60
Spot Rate : 0.3300
Average : 0.2286

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 26.27
Bid-YTW : 5.33 %

CIU.PR.B FixedReset Quote: 27.65 – 27.95
Spot Rate : 0.3000
Average : 0.2233

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-01
Maturity Price : 25.00
Evaluated at bid price : 27.65
Bid-YTW : 2.49 %

TCA.PR.Y Perpetual-Premium Quote: 52.06 – 52.46
Spot Rate : 0.4000
Average : 0.3244

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-03-05
Maturity Price : 50.00
Evaluated at bid price : 52.06
Bid-YTW : 3.52 %

MFC.PR.B Deemed-Retractible Quote: 24.03 – 24.31
Spot Rate : 0.2800
Average : 0.2055

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.03
Bid-YTW : 5.24 %

FTS.PR.G FixedReset Quote: 25.95 – 26.23
Spot Rate : 0.2800
Average : 0.2204

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-09-01
Maturity Price : 25.00
Evaluated at bid price : 25.95
Bid-YTW : 3.32 %