Archive for May, 2012

RBS.PR.B Offering Completed

Thursday, May 31st, 2012

R Split III Corp. has announced:

it has completed its initial public offering of its Class B Preferred Shares, Series 1 (the “Preferred Shares”), raising approximately $16.8 million through the issuance of 1,234,962 Preferred Shares at a price of $13.60 per Preferred Share. In addition, the Company has redeemed all of its outstanding Class A Preferred Shares.

The Preferred Shares were offered to maintain the leveraged “split share” structure of the Company following the successful reorganization of the Company (approved at a special meeting of holders of Class A Capital Shares on March 14, 2012), which, among other things, extended the redemption date of the Capital Shares for an additional five year term. The Preferred Shares were offered to the public by a syndicate of agents led by Scotia Capital Inc.

Upon the close of business on May 31, 2012 there will be 2,469,924 Capital Shares and 1,234,962 Preferred Shares issued and outstanding.

R Split III Corp. is a mutual fund corporation created to hold a portfolio of common shares of the Royal Bank of Canada. Capital Shares and Preferred Shares of R Split III Corp. are listed for trading on The Toronto Stock Exchange under the symbols RBS and RBS.PR.B respectively.

The prospectus provides the following information:

  • Coupon = 4.25%
  • Redemption Date 2017-5-31
  • Monthly Retraction with formula: 95%NAV – (2C + 1)
  • MER = 0.48% of Whole Unit Value

Asset Coverage is currently 1.7+:1

Income Coverage as of the 12H1 Financials was 1.4+:1. These financials note a wonderfully conservative dividend policy:

The Company pays fixed distributions on the Preferred Shares and should the net asset value per Unit at the date of each dividend declaration exceed the original issue price of the Preferred Shares after giving effect to the Capital Share dividend, the Company’s policy is to make cash distributions on the Capital Shares equal to the excess, if any, of dividends received by the Company on the Royal Bank Shares less the fixed preferential distribution paid on the Preferred Shares and all administrative and operating expenses. Where the net asset value per Unit at time of declaration, after giving effect to the Capital Share dividend, is less than or equal to the original price of the Preferred Shares, any excess cash will be reinvested in short-term debt securities or Royal Bank Shares.

DBRS Rating = Pfd-2(low).

Sadly, there are not enough of these preferreds extant to warrant tracking by HIMIPref™.

May 30, 2012

Thursday, May 31st, 2012

Spain is cutting off welfare recipients:

Spanish renewable-energy companies that once got Europe’s biggest subsidies are deserting the nation after the government shut off aid, pushing project developers and equipment-makers to work abroad or perish.

From wind-turbine maker Gamesa Corp. Tecnologica SA (GAM) to solar park developer T-Solar Global SA, companies are locked out of their home market for new business. These are the same suppliers that spearheaded more than $69 billion of wind and solar projects since 2004 that today supply more than 50 percent of Spain’s power demand on the most breezy and sunny days.

But fear not, subsidy fans! Germany’s still got lots of money!

Germany’s power-transmission companies have tabled plans to build four electricity Autobahns to link wind turbines off the north coast with manufacturing centres in the south – a boost for Angela Merkel after criticism from industry that Berlin has done little since announcing an accelerated nuclear phase-out a year ago.

Tennet, Amprion, 50 Hertz and Transnet BW said that building 3,800km high-voltage electricity lines – at a cost of around €20-billion – over the next decade was possible if politicians and public rallied behind the so-called energy transformation.

German two-year notes yield zero:

German two-year government notes advanced, sending the yield to zero for the first time.

The rate was at 0.002 percent at 4:36 p.m. London time.

Other countries yield a little more:

Signs of stress multiplied in financial markets today. Italy missed its target in a bond auction, driving its 10-year yields up to 6.01 percent at one point, the highest since Jan. 31. The yield was at 5.93 percent at 5:26 p.m. in Brussels. Doubts over the health of Spain’s banks pushed up Spanish 10- year yields to 6.70 percent, the highest since Nov. 28. That yield was last at 6.63 percent.

But … there’s never an ill wind …:

U.S. 5-year government bonds have also reached a new low of 0.6967 per cent, lower than the 0.7045 per cent they hit in early February, and 30-year Treasuries have also dropped to 2.72 per cent – though the low for these bonds was around 2.5 per cent in December 2008.

It was a sharply negative day for the Canadian preferred share market, with PerpetualPremiums down 15bp, FixedResets losing 31bp (about one-third of this was due to the evaporation of the bid in RY.PR.Y and may be regarded as ficticious and transient) and DeemedRetractibles off 11bp. The Performance Highlights table is longer than usual and dominated by losers. Volume was on the light side.

PerpetualDiscounts now yield 5.15%, equivalent to 6.70% interest at the standard equivalency factor of 1.3x. Long Corporates now yield about 4.4%, so the pre-tax interest-equivalent spread is now about 230bp, unchanged from the figure reported May 23.

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 0.1668 % 2,477.7
FixedFloater 4.42 % 3.79 % 30,997 17.72 1 1.8957 % 3,567.8
Floater 2.91 % 2.94 % 64,707 19.82 3 0.1668 % 2,675.2
OpRet 4.81 % 3.21 % 39,537 1.05 5 -0.2242 % 2,494.8
SplitShare 5.27 % -2.82 % 50,592 0.56 4 -0.0526 % 2,718.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2242 % 2,281.3
Perpetual-Premium 5.46 % 1.65 % 78,857 0.62 25 -0.1479 % 2,224.8
Perpetual-Discount 5.10 % 5.15 % 79,846 15.16 8 -0.1393 % 2,434.4
FixedReset 5.08 % 3.26 % 195,818 7.34 69 -0.3120 % 2,384.4
Deemed-Retractible 5.01 % 3.78 % 159,862 2.93 45 -0.1094 % 2,308.2
Performance Highlights
Issue Index Change Notes
RY.PR.Y FixedReset -8.18 % Not a real loss – the issue traded 9,500 shares today in a range of 24.59-26.77.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.59
Bid-YTW : 5.91 %
GWO.PR.P Deemed-Retractible -1.61 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.65
Bid-YTW : 5.28 %
FTS.PR.H FixedReset -1.57 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-30
Maturity Price : 23.38
Evaluated at bid price : 25.01
Bid-YTW : 2.83 %
CU.PR.C FixedReset -1.47 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-01
Maturity Price : 25.00
Evaluated at bid price : 25.55
Bid-YTW : 3.53 %
IGM.PR.B Perpetual-Premium -1.34 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.80
Bid-YTW : 5.44 %
CU.PR.B Perpetual-Premium -1.30 % Called for redemption.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-07-01
Maturity Price : 25.00
Evaluated at bid price : 25.10
Bid-YTW : 1.06 %
BAM.PR.G FixedFloater 1.90 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-30
Maturity Price : 22.30
Evaluated at bid price : 21.50
Bid-YTW : 3.79 %
Volume Highlights
Issue Index Shares
Traded
Notes
IFC.PR.A FixedReset 99,400 TD crossed 87,800 at 25.50.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.45
Bid-YTW : 3.61 %
CU.PR.A Perpetual-Premium 90,015 TD crossed 80,300 at 25.38.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-06-29
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : -8.92 %
CU.PR.B Perpetual-Premium 85,570 Called for redemption.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-07-01
Maturity Price : 25.00
Evaluated at bid price : 25.10
Bid-YTW : 1.06 %
TD.PR.K FixedReset 84,510 National crossed blocks of 54,400 and 24,400, both at 26.82.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 26.87
Bid-YTW : 2.94 %
POW.PR.D Perpetual-Discount 62,705 TD crossed 60,400 at 24.90.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-30
Maturity Price : 24.47
Evaluated at bid price : 24.80
Bid-YTW : 5.09 %
CIU.PR.B FixedReset 54,800 RBC crossed 50,000 at 26.75.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-01
Maturity Price : 25.00
Evaluated at bid price : 26.71
Bid-YTW : 3.17 %
There were 25 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
RY.PR.Y FixedReset Quote: 24.59 – 26.77
Spot Rate : 2.1800
Average : 1.1558

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.59
Bid-YTW : 5.91 %

PWF.PR.M FixedReset Quote: 25.94 – 26.30
Spot Rate : 0.3600
Average : 0.2154

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.94
Bid-YTW : 3.98 %

BNA.PR.E SplitShare Quote: 24.52 – 24.95
Spot Rate : 0.4300
Average : 0.3064

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2017-12-10
Maturity Price : 25.00
Evaluated at bid price : 24.52
Bid-YTW : 5.26 %

IGM.PR.B Perpetual-Premium Quote: 25.80 – 26.30
Spot Rate : 0.5000
Average : 0.3905

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.80
Bid-YTW : 5.44 %

CM.PR.K FixedReset Quote: 26.12 – 26.49
Spot Rate : 0.3700
Average : 0.2662

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-07-31
Maturity Price : 25.00
Evaluated at bid price : 26.12
Bid-YTW : 3.43 %

RY.PR.P FixedReset Quote: 26.11 – 26.35
Spot Rate : 0.2400
Average : 0.1637

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-24
Maturity Price : 25.00
Evaluated at bid price : 26.11
Bid-YTW : 3.67 %

New Issue: CU Straight Perpetual 4.90%

Wednesday, May 30th, 2012

Canadian Utilities Limited has announced:

it has entered into an agreement with a syndicate of underwriters co-led by BMO Capital Markets and RBC Capital Markets, and including TD Securities Inc. and Scotiabank. The underwriters have agreed to buy 6,000,000 4.90% Cumulative Redeemable Second Preferred Shares Series AA at a price of $25.00 per share for aggregate gross proceeds of $150 million.

The Series AA Preferred Shares will be issued to the public at a price of $25.00 per share and holders will be entitled to receive fixed cumulative preferential cash dividends, payable quarterly as and when declared by the Board of Directors of the Corporation at an annual rate of $1.225 per share, to yield 4.90% annually. On or after September 1, 2017, the Corporation may redeem the Series AA Preferred Shares in whole or in part from time to time, at $26.00 per share if redeemed during the 12 months commencing September 1, 2017, at $25.75 per share if redeemed during the 12 months commencing September 1, 2018, at $25.50 per share if redeemed during the 12 months commencing September 1, 2019, at $25.25 per share if redeemed during the 12 months commencing September 1, 2020, and at $25.00 per share if redeemed on or after September 1, 2021.

The offering is being made only in the provinces of Canada by means of a prospectus supplement and the closing date of the issue is expected to be on or about June 18, 2012.

CU.PR.B To Be Redeemed

Wednesday, May 30th, 2012

Canadian Utilities Limited has announced:

that it will redeem on June 30, 2012 all of its outstanding Cumulative Redeemable Second Preferred Shares Series X at a price of $25.00 per share plus accrued and unpaid dividends per share. The $150 million aggregate cost of redemption will be funded from the net proceeds of the Series AA Preferred Share offering and cash.

CU.PR.B was last mentioned on PrefBlog when it was the first Straight Perpetual to crawl back into premium territory after a long period below par during the Credit Crunch.

CU.PR.B has been tracked by HIMIPref™ and is a member of the PerpetualPremium subindex.

May 29, 2012

Tuesday, May 29th, 2012

Too soon to call it a trend … but there are interesting goings-on in the credit rating agency world:

The response to the Moody’s Investors Service downgrade of the biggest Nordic banks was rising bond and share prices.

The reaction is the latest sign that investors are paying less attention to the views of rating companies and relying more on their own analysis to determine whether to buy or sell.

Denmark, which is bringing its proposals to the European Parliament, says ratings often don’t reflect credit risks. Measures to improve the industry include a plan to cut reliance on ratings for both investors and within financial regulation, the Business Ministry in Copenhagen said May 21. The intention is also to make it easier for investors and issuers to demand compensation from ratings companies that fail to do their job properly, the ministry said.

In Denmark, banks have started firing Moody’s after winning assurances from some of the country’s biggest investors that the opinions of ratings companies hold limited value. Nykredit A/S, Denmark’s biggest mortgage lender and Europe’s largest issuer of covered bonds backed by home loans, terminated its contract with Moody’s in April, citing its “volatile” views.

There’s nothing in the article about the potential for investors and issuers to demand compensation from investment managers that fail to do their job properly – what a surprise! Assurances from large investors that opinions of ratings companies hold limited value hold limited value – what else are they going to say?

In Greek news:

The New Democracy party in Greece, which supports the austerity measures imposed by the European Union, came first in all six opinion polls published on May 26 as campaigning continued for the country’s general election on June 17.

Party leader Antonis Samaras sought to illustrate the consequences of a euro exit, saying Greek incomes, bank deposits and property values would lose at least half their value within days, while food prices would rise by a quarter.

Hmmm … maybe it will help him win. Maybe. And maybe it will also accellerate the bank run. Maybe.

It was a mixed day for the Canadian preferred share market, with PerpetualPremiums gaining 4bp, FixedResets off 2bp and DeemedRetractibles down 6bp. Volatility was average. Volume remained light.

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 0.0000 % 2,473.6
FixedFloater 4.50 % 3.86 % 30,406 17.55 1 -0.0474 % 3,501.5
Floater 2.92 % 2.94 % 67,033 19.82 3 0.0000 % 2,670.8
OpRet 4.80 % 2.83 % 41,115 1.05 5 -0.0155 % 2,500.4
SplitShare 5.25 % -2.59 % 50,770 0.55 4 0.2582 % 2,719.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0155 % 2,286.4
Perpetual-Premium 5.45 % 1.77 % 73,681 0.62 25 0.0352 % 2,228.1
Perpetual-Discount 5.09 % 5.09 % 80,884 15.15 8 0.1395 % 2,437.8
FixedReset 5.06 % 3.18 % 197,610 4.54 69 -0.0152 % 2,391.9
Deemed-Retractible 4.99 % 3.75 % 158,876 1.89 45 -0.0649 % 2,310.7
Performance Highlights
Issue Index Change Notes
MFC.PR.H FixedReset -1.21 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.26
Bid-YTW : 4.57 %
BNS.PR.N Deemed-Retractible -1.05 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-29
Maturity Price : 26.00
Evaluated at bid price : 26.48
Bid-YTW : 2.89 %
BAM.PR.N Perpetual-Discount 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-29
Maturity Price : 22.97
Evaluated at bid price : 23.40
Bid-YTW : 5.13 %
IGM.PR.B Perpetual-Premium 1.36 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.15
Bid-YTW : 5.18 %
NA.PR.P FixedReset 1.49 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-15
Maturity Price : 25.00
Evaluated at bid price : 26.60
Bid-YTW : 2.91 %
FBS.PR.C SplitShare 1.86 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-12-15
Maturity Price : 10.00
Evaluated at bid price : 10.95
Bid-YTW : -10.09 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.C FixedReset 58,255 National crossed 50,000 at 25.90.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-29
Maturity Price : 23.53
Evaluated at bid price : 25.80
Bid-YTW : 2.85 %
MFC.PR.I FixedReset 44,400 Recent new issue.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.88
Bid-YTW : 4.40 %
ENB.PR.H FixedReset 39,515 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-29
Maturity Price : 23.19
Evaluated at bid price : 25.30
Bid-YTW : 3.45 %
BNS.PR.N Deemed-Retractible 36,425 RBC crossed 25,000 at 26.50.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-01-29
Maturity Price : 26.00
Evaluated at bid price : 26.48
Bid-YTW : 2.89 %
TRP.PR.B FixedReset 33,135 National crossed 25,000 at 25.34.
YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-29
Maturity Price : 23.46
Evaluated at bid price : 25.27
Bid-YTW : 2.58 %
SLF.PR.D Deemed-Retractible 27,623 RBC bought 16,900 from anonymous at 16,900.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.35
Bid-YTW : 6.04 %
There were 18 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
FBS.PR.C SplitShare Quote: 10.95 – 11.44
Spot Rate : 0.4900
Average : 0.3570

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-12-15
Maturity Price : 10.00
Evaluated at bid price : 10.95
Bid-YTW : -10.09 %

BAM.PR.M Perpetual-Discount Quote: 23.36 – 23.70
Spot Rate : 0.3400
Average : 0.2343

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-29
Maturity Price : 23.11
Evaluated at bid price : 23.36
Bid-YTW : 5.15 %

IAG.PR.F Deemed-Retractible Quote: 25.90 – 26.30
Spot Rate : 0.4000
Average : 0.2982

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.90
Bid-YTW : 5.39 %

BAM.PR.G FixedFloater Quote: 21.10 – 21.48
Spot Rate : 0.3800
Average : 0.2967

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-29
Maturity Price : 21.82
Evaluated at bid price : 21.10
Bid-YTW : 3.86 %

TRP.PR.A FixedReset Quote: 25.55 – 25.76
Spot Rate : 0.2100
Average : 0.1398

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-29
Maturity Price : 23.64
Evaluated at bid price : 25.55
Bid-YTW : 3.18 %

MFC.PR.F FixedReset Quote: 24.30 – 24.49
Spot Rate : 0.1900
Average : 0.1272

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.30
Bid-YTW : 3.71 %

YLO: DBRS Downgrades Debt to CCC

Tuesday, May 29th, 2012

DBRS has announced that it:

has today downgraded Yellow Media Inc.’s (Yellow Media or the Company) Issuer Rating to CCC from B (low); its Medium-Term Notes rating to CCC from B (low), with an RR4 recovery rating; and its Exchangeable Subordinated Debentures to CC (high) from CCC, with an RR6 recovery rating. The trend on all ratings remains Negative.

DBRS notes that Yellow Media’s unsecured debt continues to have average recovery prospects (RR4; 30% to 50% expected recovery), while its subordinated debt has poor recovery prospects (RR6; 0% to 10% expected recovery) under a base case default/recovery scenario.

The decline in Yellow Media’s print revenue continues and is expected to be even more rapid and enduring than previously anticipated. The Q1 2012 results support this view and the trend is expected to continue. As such, Yellow Media performed an asset impairment test in relation to its most recent results and trends and recorded a goodwill impairment charge of $3 billion.

The reduced expectations for revenue, operating income and cash flow, combined with the Company’s first scheduled debt maturity in February 2013, leads DBRS to believe that the likelihood that Yellow Media’s financing activities in 2012 will involve some form of compromise for existing creditors has increased further than anticipated in the previous rating action on April 2, 2012. The Negative trend reflects the likelihood that Yellow Media’s ratings will be further downgraded with the passage of time or in the event that the Company pursues some form of recapitalization.

Yellow Media has the following issues of preferred shares outstanding: YLO.PR.A and YLO.PR.B (both retractible and both convertible into common at the company’s option, on terms that may now be considered onerous); and YLO.PR.C and YLO.PR.D (both FixedResets without the company having a conversion option).

These issues were last mentioned on PrefBlog when S&P downgraded debt to CCC; preferreds to D. These issues are all tracked by HIMIPref™ but are assigned to the Scraps index on credit concerns.

New Issue: EMA FixedReset 4.10%+265

Tuesday, May 29th, 2012

Emera Inc. has announced:

that it will issue ten million Cumulative Rate Reset First Preferred Shares, Series C (the “Series C Preferred Shares”) at a price of $25.00 per share, for aggregate gross proceeds of $250 million on a bought deal basis to a syndicate of underwriters in Canada led by Scotiabank, RBC Capital Markets and TD Securities Inc.

The holders of the Series C Preferred Shares will be entitled to receive fixed cumulative dividends at an annual rate of $1.0250 per share, payable quarterly, as and when declared by the board of directors of Emera, yielding 4.10 per cent per annum, for the initial six-year period ending on August 15, 2018. The first of such dividends, if declared, shall be payable on August 15, 2012, and shall be $0.1938 per Series C Preferred Share, based on the anticipated closing of the offering on June 7, 2012. The dividend rate will be reset on August 15, 2018 and every five years thereafter at a rate equal to the sum of the then five-year Government of Canada bond yield plus 2.65 per cent. The Series C Preferred Shares are redeemable by Emera, at its option, on August 15, 2018 and on August 15th of every fifth year thereafter.

The holders of Series C Preferred Shares will have the right to convert their shares into Cumulative Floating Rate First Preferred Shares, Series D (the “Series D Preferred Shares”), subject to certain conditions, on August 15, 2018 and on August 15 of every fifth year thereafter. The holders of the Series D Preferred Shares will be entitled to receive quarterly floating rate cumulative dividends, as and when declared by the board of directors of Emera, at a rate equal to the sum of the then 90-day Government of Canada treasury bill rate plus 2.65 per cent.

The net proceeds of the offering will be used for general corporate purposes.

The Series C Preferred Shares will be offered to the public in Canada by way of prospectus supplement to an amended and restated short form base shelf prospectus dated February 18, 2011 (amending and restating the short form base shelf prospectus of Emera dated May 19, 2010).

New Issue: ALA US-Pay FR 4.40%+358

Tuesday, May 29th, 2012

AltaGas has announced:

that it will issue 6,000,000 Cumulative Redeemable Five-Year Fixed Rate Reset Preferred Shares, Series C (the “Series C Preferred Shares”), at a price of US$25.00 per Series C Preferred Share (“the Offering”) for aggregate gross proceeds of US$150 million on a bought deal basis. The Series C Preferred Shares will be offered to the public through a syndicate of underwriters, co-led by RBC Capital Markets, CIBC and Scotiabank.

Holders of the Series C Preferred Shares will be entitled to receive a cumulative quarterly fixed dividend for the initial period ending on but excluding September 30, 2017 (the “Initial Period”) at an annual rate of 4.40%, payable on the last day of March, June, September and December, as and when declared by the Board of Directors of AltaGas. The first quarterly dividend payment is payable on October 1, 2012 and shall be US$0.3473 per Series C Preferred Share. The dividend rate will reset on September 30, 2017 and every five years thereafter at a rate equal to the sum of the then five-year US government bond yield plus 3.58%. The Series C Preferred Shares are redeemable by AltaGas, at its option, on September 30, 2017 and on September 30 of every fifth year thereafter.

Holders of Series C Preferred Shares will have the right to convert all or any part of their shares into Cumulative Redeemable Floating Rate Preferred Shares, Series D (the “Series D Preferred Shares”), subject to certain conditions, on September 30, 2017 and on September 30 every fifth year thereafter. Holders of Series D Preferred Shares will be entitled to receive a cumulative quarterly floating dividend at a rate equal to the sum of the then three-month US treasury bill yield plus 3.58%, as and when declared by the Board of Directors of AltaGas.

The Offering is expected to close on or about June 6, 2012. Net proceeds will be used to reduce outstanding indebtedness and for general corporate purposes.

AltaGas has granted to the underwriters an option, exercisable in whole or in part at any time up to 48 hours prior to the closing time of the offering, to purchase an additional 2,000,000 Series C Preferred Shares at a price of US$25.00 per share.

The Series C Preferred Shares will be issued pursuant to a prospectus supplement that will be filed with securities regulatory authorities in Canada under AltaGas’ short form base shelf prospectus dated December 7, 2011. The Offering is subject to receipt of all necessary regulatory and stock exchange approvals.

Update, 2012-5-31:Rated Pfd-3 by DBRS.

Update, 2013-2-27: Trades as ALA.PR.U

May 28, 2012

Monday, May 28th, 2012

Interesting commentary from Fitch about possible changes in the money market:

In particular, we believe further MMF reform will likely lead managers to expand their product offerings beyond MMFs, possibly resulting in one unintended consequence. A potential decrease in information transparency for short-term market participants and regulators could occur, should more cash be moved from highly regulated and transparent MMFs into other parts of the financial system.

For example, corporate investors may shift liquid funds into separately managed cash accounts (SPA) as an alternative to MMFs. SPAs are one way a corporate treasurer could choose to diversify cash management activities without relying on MMFs. SPAs are managed in line with customized investment strategies that are designed to meet the investment objectives of a specific client. Importantly, SPAs are generally designed to provide liquidity from maturing securities with only minimum reliance on secondary market liquidity, which could be could be constrained during times of market stress. In contrast to MMFs which offer same-day liquidity, SPAs require corporate treasurers to have a high degree of confidence in their cash needs and cash flow forecasts.

This comes after revelations that the Fed is offering investment advice:

The Federal Reserve has warned U.S. money market funds to cut their investments in Europe, a top official says.

“The Fed and regulators have tried to stress to money market funds to reduce their exposure to European financial institutions,” Charles Plosser, the president of the Reserve Bank of Philadelphia, told the Wall Street Journal.

However, the Fed has not yet begun to centrally micromanage the economy:

Federal Labour Minister Lisa Raitt tabled a back-to-work bill on Monday, ordering an end to the strike within days at Canadian Pacific Railway Ltd. …

Ms. Raitt’s move comes as the economic impact mounts from the six-day strike by 4,800 members of the Teamsters Canada Rail Conference.

It was a negative day for the Canadian preferred share market, with PerpetualDiscounts flat, FixedResets off 5bp and DeemedRetractibles losing 17bp. SLF DeemedRetractibles performed shockingly badly, with all of them down far more than would have been predicted from knowing that they went ex-Dividend today; otherwise the Performance Highlights table shows fair volatility. Volume was light; no surprise given that it was a US holiday.

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 0.3347 % 2,473.6
FixedFloater 4.50 % 3.86 % 29,726 17.56 1 -1.3551 % 3,503.1
Floater 2.92 % 2.94 % 67,892 19.82 3 0.3347 % 2,670.8
OpRet 4.80 % 2.57 % 42,764 1.05 5 -0.0155 % 2,500.8
SplitShare 5.26 % -4.64 % 51,029 0.55 4 0.1243 % 2,712.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0155 % 2,286.7
Perpetual-Premium 5.46 % 2.39 % 71,500 0.62 25 -0.0016 % 2,227.3
Perpetual-Discount 5.10 % 5.19 % 81,823 15.06 8 0.4776 % 2,434.4
FixedReset 5.06 % 3.18 % 192,541 4.25 69 -0.0458 % 2,392.2
Deemed-Retractible 4.99 % 3.69 % 164,892 2.72 45 -0.1733 % 2,312.2
Performance Highlights
Issue Index Change Notes
SLF.PR.C Deemed-Retractible -1.68 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.29
Bid-YTW : 6.08 %
SLF.PR.D Deemed-Retractible -1.54 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.45
Bid-YTW : 5.98 %
SLF.PR.B Deemed-Retractible -1.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.51
Bid-YTW : 5.75 %
SLF.PR.E Deemed-Retractible -1.40 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.53
Bid-YTW : 5.99 %
SLF.PR.A Deemed-Retractible -1.39 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.41
Bid-YTW : 5.75 %
BAM.PR.G FixedFloater -1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-28
Maturity Price : 21.83
Evaluated at bid price : 21.11
Bid-YTW : 3.86 %
IAG.PR.E Deemed-Retractible -1.04 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-12-31
Maturity Price : 25.25
Evaluated at bid price : 25.60
Bid-YTW : 5.58 %
CIU.PR.A Perpetual-Discount 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-28
Maturity Price : 24.55
Evaluated at bid price : 24.85
Bid-YTW : 4.63 %
BAM.PR.N Perpetual-Discount 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-28
Maturity Price : 22.76
Evaluated at bid price : 23.16
Bid-YTW : 5.19 %
BAM.PR.M Perpetual-Discount 1.09 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-28
Maturity Price : 22.72
Evaluated at bid price : 23.15
Bid-YTW : 5.19 %
Volume Highlights
Issue Index Shares
Traded
Notes
BNS.PR.X FixedReset 116,303 National crossed 90,800 at 26.63.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-25
Maturity Price : 25.00
Evaluated at bid price : 26.62
Bid-YTW : 3.02 %
CIU.PR.B FixedReset 95,500 RBC crossed blocks of 70,000 and 15,500, both at 26.75.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-06-01
Maturity Price : 25.00
Evaluated at bid price : 26.70
Bid-YTW : 3.18 %
CM.PR.L FixedReset 95,334 National crossed 76,000 at 26.76; RBC crossed 10,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.76
Bid-YTW : 2.99 %
CU.PR.C FixedReset 77,317 National crossed 35,000 at 25.95 and 33,000 at 25.90.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-01
Maturity Price : 25.00
Evaluated at bid price : 25.81
Bid-YTW : 3.30 %
GWO.PR.G Deemed-Retractible 66,064 Desjardins crossed 60,000 at 25.01.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.96
Bid-YTW : 5.37 %
MFC.PR.I FixedReset 57,840 Recent new issue.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.76
Bid-YTW : 4.46 %
There were 17 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IAG.PR.E Deemed-Retractible Quote: 25.60 – 26.30
Spot Rate : 0.7000
Average : 0.5416

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-12-31
Maturity Price : 25.25
Evaluated at bid price : 25.60
Bid-YTW : 5.58 %

TCA.PR.X Perpetual-Premium Quote: 51.66 – 52.37
Spot Rate : 0.7100
Average : 0.5600

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-10-15
Maturity Price : 50.00
Evaluated at bid price : 51.66
Bid-YTW : 3.47 %

NA.PR.P FixedReset Quote: 26.21 – 26.74
Spot Rate : 0.5300
Average : 0.3841

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-02-15
Maturity Price : 25.00
Evaluated at bid price : 26.21
Bid-YTW : 3.83 %

RY.PR.B Deemed-Retractible Quote: 25.66 – 26.00
Spot Rate : 0.3400
Average : 0.2153

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2015-08-24
Maturity Price : 25.00
Evaluated at bid price : 25.66
Bid-YTW : 3.87 %

BAM.PR.C Floater Quote: 17.91 – 18.34
Spot Rate : 0.4300
Average : 0.3176

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-28
Maturity Price : 17.91
Evaluated at bid price : 17.91
Bid-YTW : 2.96 %

IAG.PR.C FixedReset Quote: 25.90 – 26.18
Spot Rate : 0.2800
Average : 0.2029

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2013-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.90
Bid-YTW : 3.52 %

May 25, 2012

Friday, May 25th, 2012

Cheerful Greek thoughts from the Institute of International Finance (aka the Bankers’ Club):

The cost of Greece exiting the euro would be unmanageable and probably exceed the 1 trillion euros ($1.25 trillion) previously estimated by the Institute of International Finance, the group’s managing director said.

The Washington-based IIF’s projection from earlier this year is “a bit dated now” and “probably on the low side,” Charles Dallara said in an interview in Rome today. “Those who think that Europe, and more broadly the global economy, are really prepared for a Greek exit should think again.”

The European Central Bank’s exposure to Greek liabilities is more than twice as big as the ECB’s capital, said Dallara, who represented banks in their negotiations with the Greek government on its debt restructuring. As a result, he predicted the bank would be unable to provide liquidity and stabilize the euro-area financial sector.

For Greece, in its fifth year of recession, it may be more effective to offer extra money to help its battered economy recover, Dallara said. Because Greece’s economy has shrunk so much faster than expected, it may need more time to meet its budget targets and repay its international loans, he said.

Greece’s shrinking economy could be aided “at a cost” of an additional 10 billion euros. “We’re talking about very modest sums compared to what’s already on the table,” he said.

It was a mildly positive day for the Canadian preferred share market, with PerpetualPremiums gaining 1bp, FixedResets up 12bp and DeemedRetractibles winning 14bp. Volatility was muted. Volume was well below 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 -0.0372 % 2,465.3
FixedFloater 4.44 % 3.81 % 29,689 17.69 1 0.0000 % 3,551.2
Floater 2.93 % 2.95 % 68,910 19.80 3 -0.0372 % 2,661.9
OpRet 4.80 % 2.88 % 44,534 1.06 5 0.0000 % 2,501.2
SplitShare 5.27 % -5.77 % 51,696 0.56 4 0.3742 % 2,709.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0000 % 2,287.1
Perpetual-Premium 5.46 % 2.36 % 72,175 0.63 25 0.0110 % 2,227.3
Perpetual-Discount 5.12 % 5.25 % 82,858 14.98 8 -0.4084 % 2,422.8
FixedReset 5.05 % 3.17 % 189,041 2.33 69 0.1248 % 2,393.3
Deemed-Retractible 4.98 % 3.52 % 170,986 1.90 45 0.1367 % 2,316.3
Performance Highlights
Issue Index Change Notes
BAM.PR.M Perpetual-Discount -1.59 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-25
Maturity Price : 22.51
Evaluated at bid price : 22.90
Bid-YTW : 5.25 %
BAM.PR.N Perpetual-Discount -1.34 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-25
Maturity Price : 22.54
Evaluated at bid price : 22.91
Bid-YTW : 5.25 %
HSE.PR.A FixedReset 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-25
Maturity Price : 23.50
Evaluated at bid price : 25.75
Bid-YTW : 3.17 %
IAG.PR.A Deemed-Retractible 3.42 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.01
Bid-YTW : 5.65 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.I FixedReset 128,885 Recent new issue.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.80
Bid-YTW : 4.49 %
NA.PR.K Deemed-Retractible 97,138 TD crossed 48,000 at 25.50; Desjardins crossed 25,000 at the same price.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2012-06-24
Maturity Price : 25.00
Evaluated at bid price : 25.46
Bid-YTW : -13.92 %
RY.PR.D Deemed-Retractible 77,685 TD crossed blocks of 40,000 and 25,000, both at 25.67.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2016-02-24
Maturity Price : 25.00
Evaluated at bid price : 25.66
Bid-YTW : 3.76 %
SLF.PR.A Deemed-Retractible 66,976 Nesbitt crossed 56,400 at 23.76.
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.74
Bid-YTW : 5.56 %
SLF.PR.D Deemed-Retractible 63,403 Nesbitt crossed 56,400 at 22.76. Gee, I wonder if that’s related to the cross in SLF.PR.A, above!
YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.80
Bid-YTW : 5.77 %
TD.PR.G FixedReset 59,665 National crossed 48,400 at 26.62.
YTW SCENARIO
Maturity Type : Call
Maturity Date : 2014-04-30
Maturity Price : 25.00
Evaluated at bid price : 26.63
Bid-YTW : 2.99 %
There were 19 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
IGM.PR.B Perpetual-Premium Quote: 25.78 – 26.30
Spot Rate : 0.5200
Average : 0.4548

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.78
Bid-YTW : 5.44 %

BAM.PR.T FixedReset Quote: 25.06 – 25.24
Spot Rate : 0.1800
Average : 0.1173

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2042-05-25
Maturity Price : 23.19
Evaluated at bid price : 25.06
Bid-YTW : 3.84 %

IAG.PR.E Deemed-Retractible Quote: 25.87 – 26.30
Spot Rate : 0.4300
Average : 0.3678

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.87
Bid-YTW : 5.30 %

BNA.PR.C SplitShare Quote: 22.81 – 23.00
Spot Rate : 0.1900
Average : 0.1326

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2019-01-10
Maturity Price : 25.00
Evaluated at bid price : 22.81
Bid-YTW : 5.97 %

RY.PR.I FixedReset Quote: 25.64 – 25.87
Spot Rate : 0.2300
Average : 0.1786

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.64
Bid-YTW : 3.39 %

GWO.PR.P Deemed-Retractible Quote: 25.95 – 26.09
Spot Rate : 0.1400
Average : 0.0986

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 25.95
Bid-YTW : 5.11 %