Archive for May, 2017

May 15, 2017

Monday, May 15th, 2017
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 0.6685 % 2,187.2
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.6685 % 4,013.4
Floater 3.49 % 3.64 % 53,228 18.17 4 0.6685 % 2,313.0
OpRet 0.00 % 0.00 % 0 0.00 0 0.1253 % 3,030.0
SplitShare 4.69 % 4.49 % 66,554 3.94 5 0.1253 % 3,618.5
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1253 % 2,823.3
Perpetual-Premium 5.31 % -1.92 % 69,838 0.09 22 -0.0763 % 2,786.0
Perpetual-Discount 5.08 % 5.06 % 104,967 15.31 14 -0.1285 % 3,009.8
FixedReset 4.45 % 4.04 % 211,078 6.60 94 -0.1310 % 2,328.5
Deemed-Retractible 4.99 % 4.76 % 132,137 0.11 30 -0.0095 % 2,888.9
FloatingReset 2.50 % 3.11 % 48,509 4.46 10 0.0279 % 2,534.4
Performance Highlights
Issue Index Change Notes
TRP.PR.B FixedReset -1.90 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-15
Maturity Price : 14.48
Evaluated at bid price : 14.48
Bid-YTW : 3.95 %
TRP.PR.G FixedReset -1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-15
Maturity Price : 22.27
Evaluated at bid price : 22.82
Bid-YTW : 4.28 %
ELF.PR.G Perpetual-Discount -1.00 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-15
Maturity Price : 22.45
Evaluated at bid price : 22.71
Bid-YTW : 5.27 %
BAM.PR.B Floater 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-15
Maturity Price : 13.10
Evaluated at bid price : 13.10
Bid-YTW : 3.64 %
BAM.PR.C Floater 1.16 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-15
Maturity Price : 13.10
Evaluated at bid price : 13.10
Bid-YTW : 3.64 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.F FixedReset 115,960 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.20
Bid-YTW : 9.56 %
NA.PR.X FixedReset 62,604 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-15
Maturity Price : 25.00
Evaluated at bid price : 26.80
Bid-YTW : 3.67 %
RY.PR.R FixedReset 57,796 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-08-24
Maturity Price : 25.00
Evaluated at bid price : 27.01
Bid-YTW : 3.45 %
TRP.PR.D FixedReset 40,050 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-15
Maturity Price : 21.19
Evaluated at bid price : 21.19
Bid-YTW : 4.09 %
SLF.PR.I FixedReset 34,900 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.95
Bid-YTW : 5.18 %
GWO.PR.H Deemed-Retractible 26,540 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.21
Bid-YTW : 5.48 %
There were 12 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PF.I FixedReset Quote: 26.15 – 27.15
Spot Rate : 1.0000
Average : 0.5645

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-31
Maturity Price : 25.00
Evaluated at bid price : 26.15
Bid-YTW : 3.91 %

TRP.PR.G FixedReset Quote: 22.82 – 23.25
Spot Rate : 0.4300
Average : 0.2533

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-15
Maturity Price : 22.27
Evaluated at bid price : 22.82
Bid-YTW : 4.28 %

MFC.PR.N FixedReset Quote: 21.27 – 21.66
Spot Rate : 0.3900
Average : 0.2604

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.27
Bid-YTW : 5.90 %

MFC.PR.L FixedReset Quote: 20.30 – 20.62
Spot Rate : 0.3200
Average : 0.1982

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.30
Bid-YTW : 6.48 %

PWF.PR.F Perpetual-Premium Quote: 25.08 – 25.49
Spot Rate : 0.4100
Average : 0.2897

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-14
Maturity Price : 25.00
Evaluated at bid price : 25.08
Bid-YTW : 4.00 %

W.PR.M FixedReset Quote: 26.25 – 26.56
Spot Rate : 0.3100
Average : 0.1945

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-15
Maturity Price : 25.00
Evaluated at bid price : 26.25
Bid-YTW : 4.09 %

May PrefLetter Released!

Sunday, May 14th, 2017

The May, 2017, edition of PrefLetter has been released and is now available for purchase as the “Previous edition”. Those who subscribe for a full year receive the “Previous edition” as a bonus.

PrefLetter may now be purchased by all Canadian residents.

Until further notice, the “Previous Edition” will refer to the May, 2017, issue, while the “Next Edition” will be the June, 2017, issue, scheduled to be prepared as of the June 9 and eMailed to subscribers prior to market-opening on June 12.

PrefLetter is intended for long term investors seeking issues to buy-and-hold. At least one recommendation from each of the major preferred share sectors is included and discussed.

Note: My verbosity has grown by such leaps and bounds that it is no longer possible to deliver PrefLetter as an eMail attachment – it’s just too big for my software! Instead, I have sent passwords – click on the link in your eMail and your copy will download.

Note: The PrefLetter website has a Subscriber Download Feature. If you have not received your copy, try it!

Note: PrefLetter eMails sometimes runs afoul of spam filters. If you have not received your copy within fifteen minutes of a release notice such as this one, please double check your (company’s) spam filtering policy and your spam repository – there are some hints in the post Sympatico Spam Filters out of Control. If it’s not there, contact me and I’ll get you your copy … somehow!

Note: There have been scattered complaints regarding inability to open PrefLetter in Acrobat Reader, despite my practice of including myself on the subscription list and immediately checking the copy received. I have had the occasional difficulty reading US Government documents, which I was able to resolve by downloading and installing the latest version of Adobe Reader. Also, note that so far, all complaints have been from users of Yahoo Mail. Try saving it to disk first, before attempting to open it.

Note: There have been other scattered complaints that double-clicking on the links in the “PrefLetter Download” email results in a message that the password has already been used. I have been able to reproduce this problem in my own eMail software … the problem is double-clicking. What happens is the first click opens the link and the second click finds that the password has already been used and refuses to work properly. So the moral of the story is: Don’t be a dick! Single Click!

Note: Assiduous Reader DG informs me:

In case you have any other Apple users: you need to install a free App from the apple store called “FileApp”. It comes with it’s own tutorial and allows you to download and save a PDF file.

However, Assiduous Reader Adrian informs me in the comments to the January 2015 release:

Some nitpicking for DG:
FileApp costs $1.19 in the Apple Store.

But Adrian2 now advises:

Well, as of now, FileApp is free (again?).

So cross your fingers!

CU.PR.C : Convert or Hold?

Saturday, May 13th, 2017

It will be recalled that CU.PR.C will reset to 3.40% (paid on par) effective June 1.

Holders of CU.PR.C have the option to convert to FloatingResets, which will pay 3-month bills plus 240bp on the par value of $25.00, reset quarterly. The deadline for notifying the company of the intent to convert is 3 p.m. (Calgary time) / 5 p.m. (Toronto time) on May 17, 2017; but note that this is a company deadline and that brokers will generally set their deadlines a day or two in advance, so there’s not much time to lose if you’re planning to convert! However, if you miss the brokerage deadline they’ll probably do it on a ‘best efforts’ basis if you grovel in a sufficiently entertaining fashion. The ticker for the new FloatingReset, if it is issued, is not yet known.

CU.PR.C is a FixedReset, 4.00%+240, that commenced trading 2011-9-21 after being announced 2011-9-13.

The most logical way to analyze the question of whether or not to convert is through the theory of Preferred Pairs, for which a calculator is available. Briefly, a Strong Pair is defined as a pair of securities that can be interconverted in the future (e.g., CU.PR.C and the FloatingReset that will exist if enough holders convert). Since they will be interconvertible on this future date, it may be assumed that they will be priced identically on this date (if they aren’t then holders will simply convert en masse to the higher-priced issue). And since they will be priced identically on a given date in the future, any current difference in price must be offset by expectations of an equal and opposite value of dividends to be received in the interim. And since the dividend rate on one element of the pair is both fixed and known, the implied average rate of the other, floating rate, instrument can be determined. Finally, we say, we may compare these average rates and take a view regarding the actual future course of that rate relative to the implied rate, which will provide us with guidance on which element of the pair is likely to outperform the other until the next interconversion date, at which time the process will be repeated.

We can show the break-even rates for each FixedReset / FloatingReset Strong Pair graphically by plotting the implied average 3-month bill rate against the next Exchange Date (which is the date to which the average will be calculated).

pairs_fr_170512
Click for Big

The market appears to have a distaste at the moment for floating rate product; most of the implied rates until the next interconversion are lower than the current 3-month bill rate and the averages for investment-grade and junk issues are both well below current market rates, at +0.02% and -0.15%, respectively! Whatever might be the result of the next few Bank of Canada overnight rate decisions, I suggest that it is unlikely that the average rate over the next five years will be lower than current – but if you disagree, of course, you may interpret the data any way you like.

Since credit quality of each element of the pair is equal to the other element, it should not make any difference whether the pair examined is investment-grade or junk, although we might expect greater variation of implied rates between junk issues on grounds of lower liquidity, and this is just what we see.

If we plug in the current bid price of the CU.PR.C FixedReset, we may construct the following table showing consistent prices for its soon-to-be-issued FloatingReset counterpart given a variety of Implied Breakeven yields consistent with issues currently trading:

Estimate of FloatingReset (received in exchange for CU.PR.C) Trading Price In Current Conditions
  Assumed FloatingReset
Price if Implied Bill
is equal to
FixedReset Bid Price Spread 0.00% -0.50% -1.00%
CU.PR.C 21.59 240bp 21.06 20.54 20.01

Based on current market conditions, I suggest that the FloatingResets that will result from conversion are likely to be cheap and trading below the price of their FixedReset counterparts. Therefore, I recommend that holders of CU.PR.C continue to hold the issue and not to convert. I will note that, given the apparent cheapness of the FloatingResets, it may be a good trade to swap the FixedReset for the FloatingReset in the market once both elements of each pair are trading and you can – presumably, according to this analysis – do it with a reasonably good take-out in price, rather than doing it through the company on a 1:1 basis. But that, of course, will depend on the prices at that time and your forecast for the path of policy rates over the next five years. There are no guarantees – my recommendation is based on the assumption that current market conditions with respect to the pairs will continue until the FloatingResets commence trading and that the relative pricing of the two new pairs will reflect these conditions.

ENB.PR.B : Convert or Hold?

Saturday, May 13th, 2017

It will be recalled that ENB.PR.B will reset to 3.415% effective June 1.

Holders of ENB.PR.B have the option to convert to FloatingResets, which will pay 3-month bills plus 240bp on the par value of $25.00, reset quarterly. The deadline for notifying the company of the intent to convert is 5:00 p.m. (Toronto time) on May 17, 2017; but note that this is a company deadline and that brokers will generally set their deadlines a day or two in advance, so there’s not much time to lose if you’re planning to convert! However, if you miss the brokerage deadline they’ll probably do it on a ‘best efforts’ basis if you grovel in a sufficiently entertaining fashion. The ticker for the new FloatingReset, if it is issued, is not yet known.

ENB.PR.B is a FixedReset, 4.00%+240, that commenced trading 2011-9-30 after being announced 2011-9-21.

The most logical way to analyze the question of whether or not to convert is through the theory of Preferred Pairs, for which a calculator is available. Briefly, a Strong Pair is defined as a pair of securities that can be interconverted in the future (e.g., ENB.PR.B and the FloatingReset that will exist if enough holders convert). Since they will be interconvertible on this future date, it may be assumed that they will be priced identically on this date (if they aren’t then holders will simply convert en masse to the higher-priced issue). And since they will be priced identically on a given date in the future, any current difference in price must be offset by expectations of an equal and opposite value of dividends to be received in the interim. And since the dividend rate on one element of the pair is both fixed and known, the implied average rate of the other, floating rate, instrument can be determined. Finally, we say, we may compare these average rates and take a view regarding the actual future course of that rate relative to the implied rate, which will provide us with guidance on which element of the pair is likely to outperform the other until the next interconversion date, at which time the process will be repeated.

We can show the break-even rates for each FixedReset / FloatingReset Strong Pair graphically by plotting the implied average 3-month bill rate against the next Exchange Date (which is the date to which the average will be calculated).

pairs_fr_170512
Click for Big

The market appears to have a distaste at the moment for floating rate product; most of the implied rates until the next interconversion are lower than the current 3-month bill rate and the averages for investment-grade and junk issues are both well below current market rates, at +0.02% and -0.15%, respectively! Whatever might be the result of the next few Bank of Canada overnight rate decisions, I suggest that it is unlikely that the average rate over the next five years will be lower than current – but if you disagree, of course, you may interpret the data any way you like.

Since credit quality of each element of the pair is equal to the other element, it should not make any difference whether the pair examined is investment-grade or junk, although we might expect greater variation of implied rates between junk issues on grounds of lower liquidity, and this is just what we see.

If we plug in the current bid price of the ENB.PR.B FixedReset, we may construct the following table showing consistent prices for its soon-to-be-issued FloatingReset counterpart given a variety of Implied Breakeven yields consistent with issues currently trading:

Estimate of FloatingReset (received in exchange for ENB.PR.B) Trading Price In Current Conditions
  Assumed FloatingReset
Price if Implied Bill
is equal to
FixedReset Bid Price Spread 0.00% -0.50% -1.00%
ENB.PR.B 18.04 240bp 17.00 16.49 15.98

Based on current market conditions, I suggest that the FloatingResets that will result from conversion are likely to be cheap and trading below the price of their FixedReset counterparts. Therefore, I recommend that holders of ENB.PR.B continue to hold the issue and not to convert. I will note that, given the apparent cheapness of the FloatingResets, it may be a good trade to swap the FixedReset for the FloatingReset in the market once both elements of each pair are trading and you can – presumably, according to this analysis – do it with a reasonably good take-out in price, rather than doing it through the company on a 1:1 basis. But that, of course, will depend on the prices at that time and your forecast for the path of policy rates over the next five years. There are no guarantees – my recommendation is based on the assumption that current market conditions with respect to the pairs will continue until the FloatingResets commence trading and that the relative pricing of the two new pairs will reflect these conditions.

May 12, 2017

Saturday, May 13th, 2017

You have no idea how happy I am that my technical difficulties have been resolved!

(table deleted)

Update, 2017-5-16 Recalculated Tables:

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 -0.1669 % 2,172.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.1669 % 3,986.8
Floater 3.51 % 3.68 % 53,306 18.08 4 -0.1669 % 2,297.6
OpRet 0.00 % 0.00 % 0 0.00 0 0.0862 % 3,026.2
SplitShare 4.70 % 4.53 % 64,586 3.95 5 0.0862 % 3,613.9
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0862 % 2,819.7
Perpetual-Premium 5.31 % -3.35 % 72,125 0.09 22 -0.0142 % 2,788.1
Perpetual-Discount 5.08 % 5.04 % 105,471 15.32 14 -0.0836 % 3,013.6
FixedReset 4.45 % 4.04 % 214,072 6.60 94 -0.0799 % 2,331.5
Deemed-Retractible 4.99 % 4.42 % 133,442 0.12 30 -0.1636 % 2,889.2
FloatingReset 2.50 % 3.08 % 48,842 4.46 10 -0.0605 % 2,533.7
Performance Highlights
Issue Index Change Notes
MFC.PR.C Deemed-Retractible -1.17 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.40
Bid-YTW : 6.17 %
PWF.PR.P FixedReset -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-12
Maturity Price : 15.88
Evaluated at bid price : 15.88
Bid-YTW : 4.03 %
MFC.PR.F FixedReset -1.12 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.24
Bid-YTW : 9.51 %
MFC.PR.B Deemed-Retractible -1.05 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.20
Bid-YTW : 5.77 %
TRP.PR.A FixedReset 1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-12
Maturity Price : 18.89
Evaluated at bid price : 18.89
Bid-YTW : 3.97 %
TRP.PR.F FloatingReset 1.13 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-12
Maturity Price : 18.85
Evaluated at bid price : 18.85
Bid-YTW : 3.27 %
TRP.PR.B FixedReset 2.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-12
Maturity Price : 14.76
Evaluated at bid price : 14.76
Bid-YTW : 3.87 %
Volume Highlights
Issue Index Shares
Traded
Notes
GWO.PR.N FixedReset 333,300 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 15.79
Bid-YTW : 9.03 %
HSE.PR.C FixedReset 127,385 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-12
Maturity Price : 22.73
Evaluated at bid price : 23.42
Bid-YTW : 4.47 %
TD.PF.A FixedReset 116,591 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-12
Maturity Price : 21.27
Evaluated at bid price : 21.56
Bid-YTW : 3.86 %
BMO.PR.K Deemed-Retractible 110,091 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-11
Maturity Price : 25.00
Evaluated at bid price : 24.99
Bid-YTW : 3.48 %
HSE.PR.E FixedReset 109,900 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-12
Maturity Price : 23.00
Evaluated at bid price : 24.01
Bid-YTW : 4.74 %
BMO.PR.L Deemed-Retractible 99,290 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2017-06-24
Maturity Price : 25.00
Evaluated at bid price : 24.99
Bid-YTW : 4.42 %
There were 26 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GWO.PR.I Deemed-Retractible Quote: 22.65 – 22.96
Spot Rate : 0.3100
Average : 0.1900

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.65
Bid-YTW : 6.16 %

BNS.PR.D FloatingReset Quote: 21.70 – 22.05
Spot Rate : 0.3500
Average : 0.2506

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.70
Bid-YTW : 4.70 %

TRP.PR.H FloatingReset Quote: 13.78 – 14.05
Spot Rate : 0.2700
Average : 0.1992

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-12
Maturity Price : 13.78
Evaluated at bid price : 13.78
Bid-YTW : 3.31 %

HSE.PR.C FixedReset Quote: 23.42 – 23.65
Spot Rate : 0.2300
Average : 0.1661

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-12
Maturity Price : 22.73
Evaluated at bid price : 23.42
Bid-YTW : 4.47 %

BAM.PR.C Floater Quote: 12.95 – 13.20
Spot Rate : 0.2500
Average : 0.1862

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-12
Maturity Price : 12.95
Evaluated at bid price : 12.95
Bid-YTW : 3.68 %

PWF.PR.P FixedReset Quote: 15.88 – 16.08
Spot Rate : 0.2000
Average : 0.1378

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-12
Maturity Price : 15.88
Evaluated at bid price : 15.88
Bid-YTW : 4.03 %

May 11, 2017

Saturday, May 13th, 2017

Better late than never!

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 0.0742 % 2,176.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.0742 % 3,993.4
Floater 3.50 % 3.65 % 50,431 18.15 4 0.0742 % 2,301.4
OpRet 0.00 % 0.00 % 0 0.00 0 -0.1878 % 3,023.6
SplitShare 4.70 % 4.55 % 64,369 3.95 5 -0.1878 % 3,610.8
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.1878 % 2,817.3
Perpetual-Premium 5.31 % -3.04 % 72,463 0.09 22 -0.0815 % 2,788.5
Perpetual-Discount 5.07 % 5.09 % 105,657 15.34 14 0.1046 % 3,016.2
FixedReset 4.44 % 4.05 % 212,955 6.55 94 -0.0869 % 2,333.4
Deemed-Retractible 4.98 % 4.32 % 132,830 0.12 30 0.0773 % 2,893.9
FloatingReset 2.46 % 2.99 % 47,293 4.47 10 -0.1069 % 2,535.2
Performance Highlights
Issue Index Change Notes
PWF.PR.T FixedReset -1.36 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-11
Maturity Price : 22.75
Evaluated at bid price : 23.13
Bid-YTW : 3.73 %
PVS.PR.E SplitShare -1.28 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-10-31
Maturity Price : 25.00
Evaluated at bid price : 26.21
Bid-YTW : 4.72 %
TRP.PR.E FixedReset -1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-11
Maturity Price : 21.45
Evaluated at bid price : 21.45
Bid-YTW : 4.07 %
BAM.PF.H FixedReset 1.64 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 26.60
Bid-YTW : 3.30 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.R FixedReset 272,595 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.98
Bid-YTW : 4.13 %
TRP.PR.J FixedReset 122,350 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 27.10
Bid-YTW : 3.56 %
BNS.PR.H FixedReset 112,026 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-01-26
Maturity Price : 25.00
Evaluated at bid price : 26.40
Bid-YTW : 3.61 %
NA.PR.X FixedReset 90,965 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-15
Maturity Price : 25.00
Evaluated at bid price : 26.85
Bid-YTW : 3.60 %
NA.PR.Q FixedReset 81,108 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.82
Bid-YTW : 3.65 %
BAM.PR.T FixedReset 63,854 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-11
Maturity Price : 19.33
Evaluated at bid price : 19.33
Bid-YTW : 4.40 %
There were 27 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
CCS.PR.C Deemed-Retractible Quote: 24.05 – 24.54
Spot Rate : 0.4900
Average : 0.3879

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.05
Bid-YTW : 5.74 %

PWF.PR.T FixedReset Quote: 23.13 – 23.48
Spot Rate : 0.3500
Average : 0.2543

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-11
Maturity Price : 22.75
Evaluated at bid price : 23.13
Bid-YTW : 3.73 %

BNS.PR.Z FixedReset Quote: 22.05 – 22.32
Spot Rate : 0.2700
Average : 0.1848

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.05
Bid-YTW : 4.98 %

SLF.PR.H FixedReset Quote: 19.02 – 19.32
Spot Rate : 0.3000
Average : 0.2188

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.02
Bid-YTW : 7.13 %

PWF.PR.A Floater Quote: 14.95 – 15.25
Spot Rate : 0.3000
Average : 0.2208

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-11
Maturity Price : 14.95
Evaluated at bid price : 14.95
Bid-YTW : 3.16 %

TRP.PR.F FloatingReset Quote: 18.64 – 18.89
Spot Rate : 0.2500
Average : 0.1743

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2047-05-11
Maturity Price : 18.64
Evaluated at bid price : 18.64
Bid-YTW : 3.27 %

New Issue: IFC Straight Perpetual 5.20%

Saturday, May 13th, 2017

Intact Financial Corporation has announced:

that it has entered into an agreement with a syndicate of underwriters led by CIBC Capital Markets together with BMO Capital Markets, National Bank Financial and TD Securities Inc. pursuant to which the underwriters have agreed to purchase, on a bought deal basis, 5,000,000 Non-Cumulative Class A Shares, Series 5 (the “Series 5 Shares”) from Intact for sale to the public at a price of $25.00 per Series 5 Share, representing aggregate gross proceeds of $125 million.

Intact has granted the underwriters an underwriters’ option to purchase up to an additional 1,000,000 Series 5 Shares at the same offering price. Should the underwriters’ option be fully exercised, the total gross proceeds of the Series 5 Shares offering will be $150 million.

The Series 5 Shares will yield 5.20% per annum, payable quarterly, as and when declared by the Board of Directors of the Company. The Series 5 Shares will not be redeemable prior to June 30, 2022. On and after June 30, 2022, Intact may, on not less than 30 nor more than 60 days’ notice, redeem for cash the Series 5 Shares in whole or in part, at the Company’s option, at $26.00 per share if redeemed on or after June 30, 2022 and prior to June 30, 2023; $25.75 per share if redeemed on or after June 30, 2023 and prior to June 30, 2024; $25.50 per share if redeemed on or after June 30, 2024 and prior to June 30, 2025; $25.25 per share if redeemed on or after June 30, 2025 and prior to June 30, 2026; and $25.00 per share if redeemed on or after June 30, 2026, in each case together with all declared and unpaid dividends up to but excluding the date of redemption.

The Series 5 Share offering is expected to close on May 24, 2017. The net proceeds will be used to partially fund the previously announced acquisition of OneBeacon Insurance Group, Ltd. If the acquisition does not close, the net proceeds will be used for general corporate purposes.

They later announced:

that due to strong demand, the underwriters have exercised their option to purchase an additional 1,000,000 Non-Cumulative Class A Shares, Series 5 (the “Series 5 Shares”), which increases the size of the previously announced offering to 6,000,000 Series 5 Shares in aggregate, to be offered on a bought deal basis to a syndicate of underwriters led by CIBC Capital Markets together with BMO Capital Markets, National Bank Financial and TD Securities Inc. The Series 5 Shares will be issued at a price of $25.00 per Series 5 Share, representing aggregate gross proceeds of $150 million. The Series 5 Shares will yield 5.20% per annum. The Series 5 Share offering is expected to close on May 24, 2017.

Intact recently raised $754-million to fund its purchase of OneBeacon Insurance Group, Ltd..

As this issue is not NVCC compliant, it will be analyzed as a DeemedRetractible. Note, however, that this carries more uncertainty than it does with most other insurers because Intact is a P&C insurer, not a life company.

BNS.PR.O Redeemed

Saturday, May 13th, 2017

The Bank of Nova Scotia announced (on March 10):

that it intends to exercise its right to redeem all outstanding Non-cumulative Preferred Shares Series 17 of Scotiabank (the “Series 17 Shares”) on April 26, 2017, at a price equal to $25.00 per share, together with all declared and unpaid dividends. Formal notice will be issued to shareholders in accordance with the share conditions.

The redemption has been approved by the Office of the Superintendent of Financial Institutions and will be financed out of the general funds of Scotiabank.

On February 28, 2017, the Board of Directors of Scotiabank announced a quarterly dividend of $0.350000 per Series 17 Share. This will be the final dividend on the Series 17 Shares and will be paid in the usual manner on April 26, 2017, to shareholders of record at the close of business on April 4, 2017, as previously announced.

BNS.PR.O was a Straight Perpetual paying 5.60% which commenced trading 2008-1-31 after being announced 2008-1-17. It has been analyzed as a DeemedRetractible since OSFI’s announcement of the NVCC rules for banks.

LB Outlook Negative, Says S&P

Friday, May 12th, 2017

Standard & Poor’s has announced:

    •We believe Montreal-based Laurentian Bank of Canada’s funding metrics have weakened, as reliance on unsecured wholesale funding has increased because loan growth has accelerated in the past couple of years more than for peers.
  • •We are revising our outlook on Laurentian Bank to negative from stable, to account for the bank’s higher dependence on short-term wholesale funding (as we define it), which we view as a riskier and less-reliable funding source.
  • •The negative outlook also reflects the potential risks we believe could materialize from the bank’s aggressive business growth (both organic and acquisitive), particularly in Business Services, which includes specialty lending to commercial segments such as equipment finance as well as lending to small- and medium-size enterprises (SMEs) and B2B Bank, its broker and third-party advisor channel, in the next two years.
  • •We are also affirming our ‘BBB/A-2’ long- and short-term issuer credit ratings on Laurentian Bank.


“The outlook revision reflects our assessment of the bank’s weakening funding metrics due to management’s increased appetite for unsecured wholesale funding, with a higher emphasis on short-term wholesale funding (as we define it), which we view as a riskier and less reliable funding source” said Michael Leizerovich S&P Global Ratings credit analyst. By our calculation, Laurentian Bank’s short-term wholesale percentage of funding base has meaningfully risen from 14.6% at year-end 2012 to 25.4% at first-quarter 2017 (versus the peer average of 23.8%). As of first-quarter 2017, the bank’s stable funding ratio (which measures the company’s ability to fund long-term assets with long-term funding) was about 87.8%, which is below the Canadian bank peer average of 98.0%. By our estimate, this ratio, which was 95.4% at year-end 2013, has steadily declined for several years as the company has sought to diversify its funding sources to fund its loan growth.

The outlook is negative, reflecting the bank’s weakening funding profile and heightened risks associated with aggressive business growth. We will continue monitoring the bank’s progress against its ambitious seven-year transformation plan and remain vigilant regarding any changes in asset performance.

Affected issues are LB.PR.F, LB.PR.H and LB.PR.J.

AIM Downgraded To P-4(high), Watch Negative By S&P; Review-Negative by DBRS

Friday, May 12th, 2017

S&P has announced:

  • •We are lowering our long-term corporate credit rating on Montreal-based Aimia Inc. to ‘BB+’ from ‘BBB-‘, reflecting our view of the risks to the company’s business and cash flow prospects following Air Canada’s notice to not renew its contract with Aimia when the current agreement expires June 30, 2020.
  • •We are also lowering our global scale rating to ‘B+’ from ‘BB’ and our Canada scale rating to ‘P-4(High)’ from ‘P-3’ on the company’s preferred shares.
  • •The ‘BBB-‘ issue-level rating on the company’s C$450 million senior secured debt outstanding is unchanged, reflecting our expectation of substantial recovery (70%-90%, rounded estimate 80%) in a default scenario. As such, we are assigning a ‘2’ recovery rating to the secured notes.
  • •At the same time, we are placing all our ratings on Aimia on CreditWatch with negative implications.
  • •The CreditWatch listing reflects the potential that we could lower the ratings on the company by one or more notches. We expect to resolve the CreditWatch placement within the next couple of months following our review of Aimia’s plans.


The Aeroplan program drives a significant portion of Aimia’s EBITDA and cash flow, and we believe the announcement increases the risk that gross billings will decline and redemptions increase through 2020. We believe this structural change could materially weaken the company’s medium-term cash flow and growth, and raise significant uncertainty about the company’s long-term outlook for sustained growth and profitability, factors that do not support an investment-grade rating, in our opinion.

The CreditWatch listing reflects the risk that we could lower our ratings on Aimia by one or more notches. We expect to resolve the CreditWatch placement within the next couple of months following our review of Aimia’s plans to manage potentially rising reward redemptions; mitigate potentially lower attractiveness of the Aeroplan program to its members; and, more important, demonstrate sufficient liquidity, financial flexibility, and capital market access to support Aimia’s debt obligations and address investments required to transition the business.

On May 11, DBRS announced that it:

has today placed Aimia Inc.’s (Aimia or the Company) Issuer Rating and Senior Secured Debt rating of BBB (low) as well as its Preferred Shares rating of Pfd-3 (low) Under Review with Negative Implications. The action follows the Company’s announcement that it has received a notice of contract non-renewal from Air Canada after the agreement’s expiration in June 2020. DBRS notes that the existing agreement and Air Canada’s purchasing commitments to Aimia remain in place until June 2020.

The Under Review with Negative Implications status reflects Air Canada’s importance to Aimia as a coalition partner and DBRS’s previous expectation that the agreement with Air Canada would be renewed, albeit on less favourable terms to Aimia. Furthermore, consumers’ reaction to this announcement, including the potential for lower engagement in the Aeroplan program and accelerated reward redemption, creates additional uncertainty going forward regarding the Company’s revenue, adjusted EBITDA and free cash flow profile (particularly with a lack of clarity on future dividend payments). Consequently, there is an increased risk in the ability to repay and/or refinance the $250 million of Senior Secured Notes due May 2019 as well as amounts outstanding on the revolving credit facility, which matures in April 2020. As such, DBRS believes that Aimia’s credit risk profile may no longer be consistent with an investment-grade rating, even if current credit metrics are maintained.

While a negative rating action is likely required, the degree of such an action will follow DBRS’s ongoing review with management, which will focus on (1) the potential impact on the business risk profile following the loss of Air Canada as a coalition partner; (2) the Company’s longer-term business strategy, including plans to maintain customer engagement and find a new airline partner(s), (3) the Company’s liquidity, including refinancing of upcoming 2019 and 2020 maturities; and (4) Aimia’s financial management intentions and dividend policy going forward. DBRS notes that in today’s release Aimia stated that going forward dividends would be linked to free cash flow. DBRS will seek greater insight on these issues to resolve the Under Review status of the ratings as soon as possible.

Affected issues are AIM.PR.A, AIM.PR.B and AIM.PR.C.