Archive for February, 2018

MFC.PR.J : Convert or Hold?

Wednesday, February 28th, 2018

It will be recalled that MFC.PR.J will reset at 4.731% effective March 20.

MFC.PR.J is currently a FixedReset, 4.00%+261, that commenced trading 2012-12-4 after being announced 2012-11-27. It is tracked by HIMIPref™ and is assigned to the FixedReset sub-index.

As this issue is not NVCC compliant and it is an insurance issue, it is analyzed as having a Deemed Retraction, effective 2025-1-31 (this date may change in the future).

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., MFC.PR.J and the FloatingReset MFC.PR.S 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_180228
Click for Big

The market appears to be relatively uninterested in floating rate product; most of the implied rates until the next interconversion are scattered around the current 3-month bill rate and the averages for investment-grade and junk issues are quite different, at +1.27% and +1.86%, respectively – although these break-even rates are much closer to the market rate than has been case for recent resets! 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 MFC.PR.J FixedReset, we may construct the following table showing consistent prices for its soon-may-be-issued FloatingReset counterpart, MFC.PR.S, given a variety of Implied Breakeven yields consistent with issues currently trading:

Estimate of FloatingReset MFC.PR.S (received in exchange for MFC.PR.J) Trading Price In Current Conditions
  Assumed FloatingReset
Price if Implied Bill
is equal to
FixedReset Bid Price Spread 1.75% 1.25% 0.75%
MFC.PR.J 24.89 261bp 24.51 24.00 23.49

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 MFC.PR.J continue to hold the issue and not to convert.

I will note that once the FloatingResets commence trading (if, in fact, they do) 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.

February 28, 2018

Wednesday, February 28th, 2018

PerpetualDiscounts now yield 5.43%, equivalent to 7.06% interest at the standard equivalency factor of 1.3x. Long corporates now yield a little over 3.90%, so the pre-tax interest-equivalent spread (in this context, the “Seniority Spread”) is now about 315bp, a sharp widening from the 300bp reported February 21.

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 2.7426 % 3,066.5
FixedFloater 0.00 % 0.00 % 0 0.00 0 2.7426 % 5,626.9
Floater 3.24 % 3.45 % 102,761 18.57 4 2.7426 % 3,242.8
OpRet 0.00 % 0.00 % 0 0.00 0 0.2205 % 3,157.4
SplitShare 4.70 % 4.07 % 62,502 3.32 5 0.2205 % 3,770.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.2205 % 2,942.0
Perpetual-Premium 5.45 % 5.05 % 77,646 14.35 20 -0.0420 % 2,825.4
Perpetual-Discount 5.42 % 5.43 % 86,305 14.72 14 -0.1900 % 2,936.3
FixedReset 4.24 % 4.57 % 166,005 4.27 102 0.1690 % 2,524.8
Deemed-Retractible 5.19 % 5.73 % 92,658 5.78 28 0.0030 % 2,907.6
FloatingReset 2.94 % 2.90 % 36,532 3.70 10 0.1458 % 2,773.6
Performance Highlights
Issue Index Change Notes
BAM.PF.D Perpetual-Discount -1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-28
Maturity Price : 21.66
Evaluated at bid price : 22.00
Bid-YTW : 5.65 %
BAM.PR.M Perpetual-Discount -1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-28
Maturity Price : 21.30
Evaluated at bid price : 21.30
Bid-YTW : 5.68 %
BAM.PF.J FixedReset 1.12 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.30
Bid-YTW : 4.68 %
BAM.PR.X FixedReset 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-28
Maturity Price : 18.56
Evaluated at bid price : 18.56
Bid-YTW : 4.88 %
MFC.PR.R FixedReset 1.37 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.90
Bid-YTW : 3.83 %
PWF.PR.A Floater 2.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-28
Maturity Price : 21.38
Evaluated at bid price : 21.65
Bid-YTW : 2.78 %
BAM.PR.K Floater 2.62 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-28
Maturity Price : 17.60
Evaluated at bid price : 17.60
Bid-YTW : 3.46 %
BAM.PR.C Floater 3.10 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-28
Maturity Price : 17.63
Evaluated at bid price : 17.63
Bid-YTW : 3.46 %
BAM.PR.B Floater 3.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-28
Maturity Price : 17.67
Evaluated at bid price : 17.67
Bid-YTW : 3.45 %
Volume Highlights
Issue Index Shares
Traded
Notes
MFC.PR.Q FixedReset 124,465 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.85
Bid-YTW : 4.82 %
BAM.PF.I FixedReset 52,173 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.85
Bid-YTW : 4.12 %
W.PR.M FixedReset 41,930 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-15
Maturity Price : 25.00
Evaluated at bid price : 26.10
Bid-YTW : 4.10 %
TD.PR.S FixedReset 41,900 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.91
Bid-YTW : 3.79 %
MFC.PR.H FixedReset 21,800 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.60
Bid-YTW : 5.42 %
SLF.PR.A Deemed-Retractible 21,160 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.15
Bid-YTW : 6.80 %
There were 17 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PR.M Perpetual-Discount Quote: 21.30 – 21.69
Spot Rate : 0.3900
Average : 0.2625

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-28
Maturity Price : 21.30
Evaluated at bid price : 21.30
Bid-YTW : 5.68 %

CCS.PR.C Deemed-Retractible Quote: 23.01 – 23.56
Spot Rate : 0.5500
Average : 0.4426

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.01
Bid-YTW : 6.40 %

BAM.PF.D Perpetual-Discount Quote: 22.00 – 22.37
Spot Rate : 0.3700
Average : 0.2710

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-28
Maturity Price : 21.66
Evaluated at bid price : 22.00
Bid-YTW : 5.65 %

PWF.PR.L Perpetual-Discount Quote: 23.40 – 23.70
Spot Rate : 0.3000
Average : 0.2117

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-28
Maturity Price : 23.14
Evaluated at bid price : 23.40
Bid-YTW : 5.50 %

HSE.PR.E FixedReset Quote: 25.11 – 25.32
Spot Rate : 0.2100
Average : 0.1271

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-03-31
Maturity Price : 25.00
Evaluated at bid price : 25.11
Bid-YTW : 4.67 %

GWO.PR.P Deemed-Retractible Quote: 24.67 – 24.91
Spot Rate : 0.2400
Average : 0.1589

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.67
Bid-YTW : 5.59 %

February 27, 2018

Wednesday, February 28th, 2018

The federal budget came out today:

One major change is C$7.2 billion ($5.7 billion) less infrastructure spending through 2019, an amount that has been allocated to other departmental spending.

On a cumulative basis, including risk buffers worth C$3 billion annually, deficits over the six years including 2017-18 are projected to total C$98 billion. That’s little changed from the October forecast.

The government has implemented a watered-down version of reforms for “tax planning.’’
•On passive investment, the new system only gradually reduces access to the small business tax rate for corporations with significant passive investment.
•Measures will limit tax advantages that larger Canadian- controlled private corporations can obtain by accessing refundable taxes on dividends.
•The two changes combined, including new restrictions on so- called income sprinkling announced last year, will add C$925 million to government coffers annually by 2022.
•The Trudeau government is also promising new rules to prevent banks and other financial institutions “from gaining a tax advantage by creating artificial losses.’’ The move will create C$560 million annually by 2022.
•A tax increase on tobacco is worth C$1.5 billion over six years, and levies on cannabis are expected to generate C$690 million over six years after it is legalized this summer.
•Canada has also taken a C$2.1 billion hit over six years from lost tariffs due to the Trans-Pacific Partnership agreement.

I’m not happy about the continuing deficit. Government finances should be managed to break even on a through-the-cycle basis, which means that right now we should be running a small but increasing surplus.

I’m also not happy about the Inefficent Business Tax Subsidy; although there has been some progress, the legions of well-connected doctors and lawyers retain their special tax bolthole:

The budget unveiled new details on the taxation of passive investment income inside private corporations.

When companies earn between $50,000 and $150,00 in a given year from passive investments, a reduced amount of their active business income will be eligible for the small business tax rate, which will be 9 per cent in 2019. (The upper limit for business income that can be taxed at the small business rate is $500,000.) The reduction will occur on a straight-line basis, with eligible income decreasing by $5 for every $1 of passive income above the $50,000 threshold.

Companies exceeding $150,000 in passive income will no longer be eligible for the small business tax rate. Those with passive income under $50,000 will not be affected, as was mentioned in a revised proposal.

Davies Ward Phillips & Vineberg LLP has published a more detailed commentary.

In order to pay for this well-deserved reward for those old-stock Canadians who, by dint of hard work, integrity, stick-to-it-ivness and the fact that mommy and daddy were doctors and lawyers, have become doctors and lawyers, the practice of tax surcharges that increase the effective marginal tax rate on plebian scum have been retained:

cwbchange_fedbudget_180227
Click for Big

See that? The benefits claw-back represents an increase to the posted effective marginal tax rate of 14% immediately, planned to decline (precipitously!) to 12% in the future. From this one programme alone. Yes, sir, it’s very important to destroy incentive to pick up that extra shift, accept that extra responsibility, move to a new province to get that slightly better job! They can have a little extra welfare money, as long as they don’t get too uppity.

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 -2.3024 % 2,984.7
FixedFloater 0.00 % 0.00 % 0 0.00 0 -2.3024 % 5,476.7
Floater 3.33 % 3.56 % 96,734 18.33 4 -2.3024 % 3,156.2
OpRet 0.00 % 0.00 % 0 0.00 0 -0.2356 % 3,150.5
SplitShare 4.71 % 4.07 % 62,806 3.33 5 -0.2356 % 3,762.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.2356 % 2,935.5
Perpetual-Premium 5.45 % 4.97 % 74,861 14.38 20 -0.0819 % 2,826.5
Perpetual-Discount 5.41 % 5.45 % 84,676 14.71 14 -0.1391 % 2,941.9
FixedReset 4.25 % 4.58 % 166,316 5.87 102 0.0592 % 2,520.6
Deemed-Retractible 5.15 % 5.74 % 92,622 5.71 28 -0.0992 % 2,907.5
FloatingReset 2.94 % 2.91 % 37,023 3.70 10 0.0129 % 2,769.5
Performance Highlights
Issue Index Change Notes
BAM.PR.B Floater -2.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-27
Maturity Price : 17.09
Evaluated at bid price : 17.09
Bid-YTW : 3.57 %
BAM.PR.K Floater -2.67 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-27
Maturity Price : 17.15
Evaluated at bid price : 17.15
Bid-YTW : 3.56 %
BAM.PR.C Floater -2.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-27
Maturity Price : 17.10
Evaluated at bid price : 17.10
Bid-YTW : 3.57 %
PWF.PR.A Floater -1.53 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-27
Maturity Price : 21.22
Evaluated at bid price : 21.22
Bid-YTW : 2.86 %
MFC.PR.F FixedReset -1.31 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.77
Bid-YTW : 7.46 %
MFC.PR.G FixedReset -1.30 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-12-19
Maturity Price : 25.00
Evaluated at bid price : 24.38
Bid-YTW : 4.56 %
TRP.PR.H FloatingReset -1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-27
Maturity Price : 16.96
Evaluated at bid price : 16.96
Bid-YTW : 3.48 %
BAM.PF.J FixedReset -1.11 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.02
Bid-YTW : 4.94 %
BAM.PF.F FixedReset 1.06 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-27
Maturity Price : 23.64
Evaluated at bid price : 24.84
Bid-YTW : 4.89 %
TRP.PR.B FixedReset 1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-27
Maturity Price : 17.25
Evaluated at bid price : 17.25
Bid-YTW : 4.60 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.A FixedReset 346,550 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-27
Maturity Price : 23.13
Evaluated at bid price : 23.53
Bid-YTW : 4.52 %
RY.PR.H FixedReset 311,298 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-27
Maturity Price : 23.12
Evaluated at bid price : 23.55
Bid-YTW : 4.52 %
NA.PR.A FixedReset 279,625 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-08-15
Maturity Price : 25.00
Evaluated at bid price : 26.15
Bid-YTW : 4.05 %
PWF.PR.T FixedReset 176,575 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-27
Maturity Price : 24.30
Evaluated at bid price : 24.73
Bid-YTW : 4.46 %
SLF.PR.E Deemed-Retractible 160,500 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.55
Bid-YTW : 7.24 %
SLF.PR.D Deemed-Retractible 128,499 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.44
Bid-YTW : 7.27 %
BMO.PR.C FixedReset 114,865 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-05-25
Maturity Price : 25.00
Evaluated at bid price : 25.29
Bid-YTW : 4.23 %
There were 26 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PF.E FixedReset Quote: 23.75 – 24.37
Spot Rate : 0.6200
Average : 0.4490

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-27
Maturity Price : 23.43
Evaluated at bid price : 23.75
Bid-YTW : 4.86 %

BAM.PR.B Floater Quote: 17.09 – 17.54
Spot Rate : 0.4500
Average : 0.2949

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-27
Maturity Price : 17.09
Evaluated at bid price : 17.09
Bid-YTW : 3.57 %

TRP.PR.H FloatingReset Quote: 16.96 – 17.55
Spot Rate : 0.5900
Average : 0.4442

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-27
Maturity Price : 16.96
Evaluated at bid price : 16.96
Bid-YTW : 3.48 %

EIT.PR.A SplitShare Quote: 25.12 – 25.82
Spot Rate : 0.7000
Average : 0.5655

YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2024-03-14
Maturity Price : 25.00
Evaluated at bid price : 25.12
Bid-YTW : 4.69 %

MFC.PR.R FixedReset Quote: 25.55 – 25.90
Spot Rate : 0.3500
Average : 0.2185

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-03-19
Maturity Price : 25.00
Evaluated at bid price : 25.55
Bid-YTW : 4.20 %

BAM.PF.J FixedReset Quote: 25.02 – 25.40
Spot Rate : 0.3800
Average : 0.2494

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2022-12-31
Maturity Price : 25.00
Evaluated at bid price : 25.02
Bid-YTW : 4.94 %

February 26, 2018

Monday, February 26th, 2018

Hard on the heels of my mention of foreigner bashing in BC and the interesting discussion that followed comes a Bloomberg story about Canadian mortgage fraud:

Evidence of mortgage fraud amid surging home prices and household debt has prompted S&P Global Ratings to lower a key risk metric for Canadian banks.

The credit ratings agency dropped its economic risk assessment by one notch due to evidence of residential-mortgage fraud at smaller Canadian banks, which could compound existing risks from the country’s hot housing market, according to a statement Friday. S&P lowered the Canadian banks’ economic risk level to 3 out of 10, with a higher number representing great risk, revising the trend to stable. That puts Canada in line with the U.S., but lower than the U.K. and Australia.

High housing prices and debt loads increase incentives for fraudulent activity such as overstating a borrower’s income to meet qualifying criteria. Additionally, a growing share of mortgages is being originated by brokers who don’t bear the credit risk for the loans like lenders, according to the statement.

That second paragraph is very poorly written (I think the reporters had problems with “higher” and “lower” as it related to the scale used by S&P), but given the rest of the article I conclude it means they have reassessed “economic risk level” so that it is less desirable than it was before.

The S&P statement also referred to a press release from Equifax Canada about a report that I can’t find on their website (I can’t find the press release there, either!):

Equifax Canada (NYSE:EFX) data suggests high-risk and suspected fraudulent mortgage activity is on the rise noting a 52 per cent increase in suspected fraudulent mortgage applications since 2013.

According to data from Equifax’s enterprise fraud management solution, ‘Falsified Account Statements’ and ‘Falsified Documents’ were the most prominent application tags, as reported by investigators. The other was ‘Conflicting Information’. Of those applications flagged, 67 per cent were from Ontario while the next highest was 12 per cent from B.C.

Little White Lies

With respect to mortgage fraud, the results of the recent Equifax survey showed:
•13 per cent of Canadians indicated they felt it was okay to tell ‘a little white lie’ when applying for a mortgage to get the house they want.
•16 per cent said they believe mortgage fraud is a victimless crime
•8 per cent admitted to misrepresenting the facts on a credit or loan application

The Cost of Buying a Home

When asked about housing prices, the results of the recent Equifax survey showed:
•84 per cent believe that the cost of home ownership is too high for first-home buyers today
•Nearly three-in-ten Canadians cite ‘more demand than supply’ (29 per cent) and ‘foreign buyers’ (27 per cent), as the main factors driving up home prices
•B.C. residents (compared to other provinces) were significantly more likely to cite foreign buyers as the top reason for home prices being driven up (75 per cent versus 42 per cent for all other provinces, respectively

So, we’ll see how it goes when mortgage renewal rates go up to 6%, which they probably will at some point, although not necessarily in my lifetime. I have a great personal interest in this matter, as every now and then a prospective client sneers at the pathetic yield offered by preferred shares and condescendingly informs me that he can get 8%, no problem, from a mortgage investment corporation. I don’t think these guys know about risk … but then, they don’t have to! Every one I’ve ever talked to is smart enough that he’ll get out before problems become apparent to the hoi polloi.

Don’t get me wrong! I’m sure that private mortgages are a decent enough asset class and I’m sure that there are some mortgage grantors who are better at their job than others. It’s just that I don’t think a lot of people enamoured of the sector know the ‘Capital Destruction Partners’ paradigm (where you make great returns for twenty years and get wiped out in the twenty-first); and all the MIC advertising I’ve ever seen plays to that ignorance.

For instance, let’s look at Income Trust One, which touts its 8.32% nine-year historical average return. The fund fact sheet refers to a “Weighted Average LTV” [Loan to Value] of 50.8%, which sounds pretty good, right? So I looked further down and got some more detail:

incometrustone_factsheetextract
Click for Big

This puzzled me. How does an LTV of 50.8% square with historical returns of 8.32% (and over 7% in each of the three quarters to the 2017Q3 publication date)? So I sent them an eMail:

I would like some clarification regarding your calculation of Loan to Value as reported on your Fund Fact Sheet as of September 30, 2017.

How do your calculations account for the Security Position of your mortgages?

For instance, if a property is considered to have a value of $800,000 and has a first mortgage outstanding with another firm for $400,000 and you have a second mortgage on the property for $200,000, what do you consider the LTV for your portion of the mortgage to be?

… and they were kind enough to answer …

Thank you for your email. Good question.

The loan to value (LTV) is calculated as the total amount of loan been borrowed (not just our portion) on a property (1st mortgage+ 2nd mortgage+…) / the appraisal value of the property.

Using your example below, the LTV will be (1st mortgage balance $400,000 + 2nd mortgage $200,000)/property appraised value ($800,000): ($400,000+$200,000)/$800,000 = 75%

So that seems reasonable enough and is actually quite heartening … but it’s not the whole story because it does not account for the subordination of the second mortgage; it treats the first and second mortgages equally for LTV calculation purposes and so is obviously not a metric one would wish to use much for risk evaluation purposes.

For instance, in a first-mortgage-only situation, a LTV of 75% means that if the property loses 25% of its value, then the mortgage debt is exactly covered. This is also the case when the $600,000 loan is split as above. So far, so good.

But say the property loses half its value. In this case, the first mortgage is precisely covered and the second mortgage is wiped out. That is the crucial difference. This is the structured finance conundrum that led to a lot of people getting nasty surprises during the Credit Crunch, as discussed long ago in the post Hull & White on AAA Tranches of Subprime.

Now I don’t want anybody to think that I’m picking on Income Trust One – I looked at them only because I saw their ad in the paper on the weekend when I had a little spare time that I created by neglecting my programming duties. It may be the best investment ever. It might not be. To take an informed view, I would have to do some very detailed work on the component mortgages of the Fund – and this level of detail is not available in the fund’s offering memorandum or the audited financial statements. Then I’d need some kind of covariance model and all that other good stuff we learned about during the Credit Crunch. Also, one notices from the 17Q3 Financial Statements (unaudited) that the fund is levered up: unitholders’ equity of $127-million is boosted with a $43-million loan, so that has to be accounted for. I’m not going to do all that work.

And I don’t think any of the guys who have sneered at the paltry expected yields on Canadian Preferred shares have done all that work either.

A recent survey shows Canadians don’t know the difference between their bank and their mommy:

Among the most common types of advice retail bank customers seek are investment-related advice (47 per cent); quick tips to help improve their financial situation (45 per cent); retirement-related advice (42 per cent); advice to help keep track of spending and household budgets (32 per cent); and in-depth financial review (30 per cent).

In addition, almost 30 per cent of customers younger than 40 years old say they are “very interested” in receiving advice from their bank.

There’s a good drone story from the UK:

A man who crashed his car in freezing night-time temperatures was saved from hypothermia when he was found by a police thermal-imaging drone.

He was discovered in a deep ditch, 500ft (160m) away from his car on the A16 near Ludborough, Lincolnshire.

Sgt [Mike] Templeman said: “We didn’t know if this male had been picked up, [or] if he had carried on walking.

“We did extensive searches in the [police] vehicles, obviously we are very rural and it was very dark so you’re limited in what you can see.”

The OPP has a similar system, but I don’t know how widely deployed it is:

The OPP and Georgian Bay Volunteer Search And Rescue (GBVSAR) have taken over the Wye Marsh in a training session today [November 29, 2017]. Volunteers and officers have set up a command post to search for two “missing” men at the marsh. The scenario details that the men didn’t return to their vehicle early in the morning and the OPP and GBVSAR have been deployed to help look for them.

The OPP are able to bring in a UAS (unmanned aerial system), aka a drone, to help aid in the search. The drone has the ability to go up about 400 ft off the ground and travel up to speeds up 16-20 knots. There’s a thermal imaging camera on board to help the operator on the ground track what they are seeing from the sky. The camera is detailed enough to show the operator when something is an animal or a person in possible need of assistance.

BC has a formal testing programme:

A year into a pilot project to test unmanned aerial vehicles (UAVs) — commonly known as drones — for search and rescue, the province says the jury is still out on the high-tech helpers.

Search teams in Coquitlam and Kamloops got the go ahead from Emergency Management B.C. (EMBC) to test the tools last December [2016].

But EMBC search and rescue specialist Andrew Morrison said the drones haven’t seen enough air time yet to draw any firm conclusions.

“For example, Coquitlam Search and Rescue had zero deployments. Kamloops Search and Rescue had requested a UAV 18 times and deployed nine times,” he said.

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 0.4191 % 3,055.0
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.4191 % 5,605.8
Floater 3.25 % 3.46 % 96,093 18.55 4 0.4191 % 3,230.6
OpRet 0.00 % 0.00 % 0 0.00 0 0.0550 % 3,157.9
SplitShare 4.70 % 4.04 % 62,172 3.33 5 0.0550 % 3,771.3
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0550 % 2,942.5
Perpetual-Premium 5.45 % 4.96 % 72,064 14.38 20 0.0000 % 2,828.9
Perpetual-Discount 5.40 % 5.42 % 87,723 14.73 14 0.3650 % 2,946.0
FixedReset 4.25 % 4.56 % 167,451 5.81 102 0.0780 % 2,519.1
Deemed-Retractible 5.14 % 5.72 % 90,735 5.72 28 0.1746 % 2,910.4
FloatingReset 2.94 % 2.96 % 38,172 3.71 10 0.0825 % 2,769.2
Performance Highlights
Issue Index Change Notes
TD.PF.C FixedReset 1.14 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-26
Maturity Price : 22.81
Evaluated at bid price : 23.16
Bid-YTW : 4.58 %
BAM.PR.T FixedReset 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-26
Maturity Price : 21.30
Evaluated at bid price : 21.58
Bid-YTW : 4.85 %
BAM.PR.N Perpetual-Discount 1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-26
Maturity Price : 21.27
Evaluated at bid price : 21.54
Bid-YTW : 5.59 %
BAM.PF.B FixedReset 1.27 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-26
Maturity Price : 23.49
Evaluated at bid price : 24.00
Bid-YTW : 4.87 %
TRP.PR.H FloatingReset 1.35 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-26
Maturity Price : 17.30
Evaluated at bid price : 17.30
Bid-YTW : 3.46 %
BAM.PF.C Perpetual-Discount 1.38 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-26
Maturity Price : 21.67
Evaluated at bid price : 21.99
Bid-YTW : 5.59 %
BAM.PF.D Perpetual-Discount 1.42 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-26
Maturity Price : 21.90
Evaluated at bid price : 22.19
Bid-YTW : 5.60 %
Volume Highlights
Issue Index Shares
Traded
Notes
IGM.PR.B Perpetual-Premium 204,350 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-03-28
Maturity Price : 25.25
Evaluated at bid price : 25.41
Bid-YTW : 2.99 %
SLF.PR.B Deemed-Retractible 171,800 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.01
Bid-YTW : 6.41 %
MFC.PR.G FixedReset 138,271 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-12-19
Maturity Price : 25.00
Evaluated at bid price : 24.70
Bid-YTW : 4.19 %
PWF.PR.P FixedReset 103,114 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-26
Maturity Price : 19.72
Evaluated at bid price : 19.72
Bid-YTW : 4.38 %
MFC.PR.O FixedReset 73,200 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.41
Bid-YTW : 3.69 %
MFC.PR.Q FixedReset 53,325 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.90
Bid-YTW : 4.78 %
There were 35 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TRP.PR.F FloatingReset Quote: 20.85 – 21.20
Spot Rate : 0.3500
Average : 0.2575

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-26
Maturity Price : 20.85
Evaluated at bid price : 20.85
Bid-YTW : 3.65 %

MFC.PR.N FixedReset Quote: 23.59 – 23.89
Spot Rate : 0.3000
Average : 0.2110

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.59
Bid-YTW : 5.13 %

TD.PF.D FixedReset Quote: 24.16 – 24.41
Spot Rate : 0.2500
Average : 0.1680

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-26
Maturity Price : 23.14
Evaluated at bid price : 24.16
Bid-YTW : 4.81 %

CU.PR.I FixedReset Quote: 25.31 – 25.60
Spot Rate : 0.2900
Average : 0.2106

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-01
Maturity Price : 25.00
Evaluated at bid price : 25.31
Bid-YTW : 4.02 %

HSE.PR.A FixedReset Quote: 17.94 – 18.45
Spot Rate : 0.5100
Average : 0.4378

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-26
Maturity Price : 17.94
Evaluated at bid price : 17.94
Bid-YTW : 4.93 %

MFC.PR.O FixedReset Quote: 26.41 – 26.60
Spot Rate : 0.1900
Average : 0.1235

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-06-19
Maturity Price : 25.00
Evaluated at bid price : 26.41
Bid-YTW : 3.69 %

New Issue: IAG FixedReset, 4.80%+275

Monday, February 26th, 2018

Industrial Alliance Insurance and Financial Services Inc. has announced (emphasis from original) that it and:

PPI Management Inc. (PPI), a leading Canadian insurance marketing firm, today announced that they have reached an agreement for iA Financial Group to acquire PPI. The transaction is effective immediately.

The Company announces that it has today entered into an agreement pursuant to which a syndicate of underwriters co-led by TD Securities Inc. and National Bank Financial Inc. (the “Common Share Underwriters”) will purchase, on a bought deal basis, 2,500,000 common shares from iA Financial Group at a price of $54.10 per common share, representing aggregate gross proceeds of $135 million (the “Common Share Offering”).

Series I Preferred Share Offering
The Company announces that it today also entered into an agreement with a syndicate of underwriters co-led by TD Securities Inc. and National Bank Financial Inc. (the “Preferred Share Underwriters”), under which the Preferred Share Underwriters have agreed to buy, on a bought deal basis, 6,000,000 Non-Cumulative 5-Year Rate Reset Class A Preferred Shares Series I (the “Series I Preferred Shares”) from iA Financial Group at a price of $25.00 per Series I Preferred Share, representing aggregate gross proceeds of $150 million (the “Series I Preferred Share Offering” and, together with the Common Share Offering, the “Offerings”). iA Financial Group has also granted the Preferred Share Underwriters an option, exercisable in whole or in part at any time up to 48 hours prior to closing, to purchase up to an additional 2,000,000 Series I Preferred Shares at a price of $25.00 per share for additional aggregate gross proceeds of up to $50 million.

Holders of the Series I Preferred Shares will be entitled to receive a non-cumulative quarterly fixed dividend of $1.20 per Series I Preferred Share, yielding 4.80% per annum, as and when declared by the Board of Directors of iA Financial Group, for the initial period up to but excluding March 31, 2023. On March 31, 2023 and on March 31 every five years thereafter, the dividend rate will reset to be equal to the then current five-year Government of Canada bond yield plus 2.75%. Holders of the Series I Preferred Shares will have the right, at their option, to convert their shares into Non-Cumulative Floating Rate Class A Preferred Shares Series J (the “Series J Preferred Shares”), subject to certain conditions and the Company’s right to redeem the Series I Preferred Shares as described below, on March 31, 2023 and on March 31 every five years thereafter. Holders of the Series J Preferred Shares will be entitled to receive a quarterly non-cumulative floating rate dividend, as and when declared by the Board of Directors of iA Financial Group, equal to the 90-day Government of Canada Treasury Bill Rate plus 2.75%. Holders of the Series J Preferred Shares will have the right, at their option, to convert their shares into Series I Preferred Shares, subject to certain conditions and the Company’s right to redeem the Series J Preferred Shares as described below, on March 31, 2028 and on March 31 every five years thereafter.

The Series I Preferred Shares will not be redeemable by iA Financial Group prior to March 31, 2023. On March 31, 2023 and on March 31 every five years thereafter, iA Financial Group may, subject to certain conditions (including regulatory approval), redeem all or any part of the Series I Preferred Shares at a cash redemption price per share of $25.00 together with all declared and unpaid dividends. The Company may redeem all or any part of the Series J Preferred Shares at a cash redemption price per share of $25.00 together with all declared and unpaid dividends in the case of redemptions on March 31, 2028 and on March 31 every five years thereafter or $25.50 together with all declared and unpaid dividends in the case of redemptions on any other date after March 31, 2023.

The net proceeds of the Offerings will be used for general corporate purposes and to maintain and replenish iA Financial Group’s capital base, including after giving effect to the payment of the purchase price for the Acquisition.

On a pro forma basis, after giving effect to the Offerings (but without giving effect to any potential exercise of the over-allotment option under the Common Share Offering or the Preferred Share Underwriters’ option), the Company estimates that, as at December 31, 2017, its solvency ratio would increase by 12 percentage points, from 209% to 221%. After giving effect to the PPI acquisition completed today on February 26, 2018 (-8 percentage points) and the DAC acquisition completed earlier on January 23, 2018 (-8 percentage points), the solvency ratio would be 205%.

The Common Share Offering and the Series I Preferred Share Offering are each expected to separately close on or about March 7, 2018, subject to certain conditions, including Toronto Stock Exchange and other customary regulatory approvals. The Offerings will be made pursuant to separate prospectus supplements to iA Financial Group’s short form base shelf prospectus dated June 22, 2017, which will be filed with the Canadian securities regulatory authorities and will be available on SEDAR at www.sedar.com.

As this issue is not NVCC compliant and it is an insurance issue, it is analyzed as having a Deemed Retraction, effective 2025-1-31 (this date may change in the future).

This issue isn’t all that badly priced. IAG.PR.G, the only other FixedReset issued by the company, is currently described as 3.777%+285 and will reset 2022-6-30 – prior to the reset of this new issue. It closed today at 24.15-22. You’re losing about a point in dividends every year for the four years-odd until reset on a $25.00 par value, so that’s worth a buck; this correction means the issues are reasonably close to being fairly-priced relative to each other. The yields to the Deemed Maturity 2025-1-31 are 4.88% for IAG.PR.G and 4.82% for the new issue, after accounting for resets at the current GOC-5 level.

IAG To Vote On Holdco / Opco Structure

Monday, February 26th, 2018

Industrial Alliance Insurance and Financial Services Inc. has announced (emphasis added):

that, following its February 5, 2018 announcement of its intention to create a holding company, it has entered into an arrangement agreement (the “Arrangement Agreement”) with a newly created entity, iA Financial Corporation Inc. (“iAFC”), and that its Board of Directors is unanimously recommending that common shareholders vote in favour of a plan of arrangement (the “Plan of Arrangement”) that, upon completion, would result in iAFC becoming a holding company as well as the parent corporation of the Company.

The purpose of the arrangement transaction (the “Arrangement”) is to adapt the Company’s legal and corporate structure to the group’s current size, allow greater financial and, commercial flexibility in pursuing its growth strategy and better reflect the diversification of its business. It will also provide the Company with a corporate structure that is as flexible as and substantially similar to that of its principal competitors.

In recommending that common shareholders vote in favour of the Plan of Arrangement, the Board of Directors considered and relied on, among other factors, an opinion received from National Bank Financial Inc. to the effect that, subject to the assumptions, limitations and qualifications set out in such opinion, the proposed Arrangement is fair, from a financial point of view, to the Company’s common shareholders.

Under the Plan of Arrangement, the existing assets and liabilities of the Company would, immediately following the Arrangement, remain with the Company, and iAFC would own all of the outstanding common shares of the Company. Common shareholders of the Company would become common shareholders of the new publicly-traded iAFC. Upon shareholder, Court and all statutory and regulatory approvals having been obtained and the subsequent effectiveness of the Plan of Arrangement, the Company’s common shares would be exchanged for common shares of iAFC, on a one-to-one basis, and shareholders would not be required to take any action for the exchange of shares.

Holders of the Company’s then publicly issued and outstanding preferred shares (collectively, the “Preferred Shares”) will remain holders of the Company’s Preferred Shares, and holders of the Company’s then publicly issued and outstanding debentures (collectively, the “Debentures”) will remain holders of Debentures of the Company. The Arrangement Agreement provides as a condition, among others, that iAFC must sign and deliver unconditional and irrevocable guarantees with respect to the Company’s payment obligations on the outstanding Preferred Shares and Debentures.

Further details of the Arrangement will be included in the Company’s Management Proxy Circular (the “Circular”) for the 2018 Annual Meeting of Shareholders and Participating Policyholders to be combined with a Special Meeting of Shareholders to consider the Arrangement that will be held on May 10, 2018 (the “Meeting”), which Circular is expected to be mailed to shareholders in early April. Assuming shareholder approval, the Arrangement would become effective following the Meeting, pending the approval and sanction of the Arrangement by the Superior Court of Quebec (the “Court”) and the authorization of the minister of Finance (Québec) following a report in respect thereof by the Autorité des marchés financiers (Québec) under the applicable provisions of the Act respecting insurance (Québec). It is currently anticipated that the Company will be filing the relevant materials with a view to obtaining an Interim Order from the Court for the Arrangement and the Meeting in the coming weeks.

In addition, the Company notes that it has tabled a private bill with the National Assembly of Quebec, the purpose of which is to specifically permit the Company to proceed with the Arrangement notwithstanding the existing provision in the special statute governing it that prohibits any person (together with its associates) from acquiring, directly or indirectly, voting shares representing 10% or more of the voting rights attached to such shares (the “10% Voting and Ownership Limitation”) and, following which the 10% Voting and Ownership Limitation would apply at the level of iAFC as the new parent and publicly traded holding company. As tabled, the private bill also contemplates that it shall be prohibited for any person to proceed with a transaction as a result of which, following the Arrangement, iAFC would cease to hold, directly or indirectly, 100% of the voting rights attached to the Company’s voting shares.

Norton Rose Fulbright is acting as external legal advisors to the Company with respect to the Arrangement.

I’m very pleased to see that the preferred shares will remain at the operating level – it’s always better to be closer to the money! Structural subordination can, on occasion, be deemed by the Credit Rating Agencies to be worth a notch of credit.

Affected issues are IAG.PR.A and IAG.PR.G, as well as the new issue announced today.

Toronto Rock Lacrosse Ticket Giveaway … Update #3

Monday, February 26th, 2018

I have four more pairs of Toronto Rock Lacrosse tickets to give away!

The games take place at the Air Canada Centre and the seats are very good. Just tell me which ones you would like. A decision regarding who gets tickets will be made two weeks before each game and I will mail them to the lucky winner; while preference will be given to customers and those who tell me they’ve got a kid who plays lacrosse, anybody can win. If you win and don’t want your name publicized, that’s fine.

The games are:

Toronto Rock Lacrosse Ticket Giveaway
Date Opponent
Saturday
2018-1-27
7pm
New England Black Wolves
Saturday
2018-2-3
7pm
Calgary Roughnecks
Saturday
2018-3-3
7pm
Georgia Swarm
Sunday
2018-3-11
3pm
New England Black Wolves
Friday
2018-3-30
7:30pm
Colorado Mammoth
Friday
2018-4-13
7:30pm
Rochester Knighthawks
???
???
???
Home Playoff Game 1
If there is one!
???
???
???
Coupons Redeemable for available tickets
Expires 2018-4-14

The tickets for the January 27 game were given to a non-client … see, anybody can win! Assiduous Reader fed received the February 3 tickets and Assiduous Reader CC will be going to the March 3 game. PrefLetter subscriber AC won the tickets to the March 11 game. The next giveaway is for the game against Colorado Mammoth on March 30 (Good Friday) … get your eMails in! Or, get an early entry in for a later game!

The games are a lot of fun. One thing that has impressed me is that these guys’ technical skills are so good they can concentrate on strategy … there are a lot fewer loose balls than I remember from my days of box lacrosse at age 10!

The redeemable coupons can be exchanged for tickets for any game, but there are no guarantees regarding just what seats you will get. Still, if you would like to plan an outing for four, rather than just a pair, let me know and … you might get two ‘real’ tickets and the two coupons!

The play-off game? There’s no guarantee that there will be one, but you could always cross your fingers and ask for them.

To try your luck at receiving a pair of tickets, just eMail me or comment on this post.

AX.PR.U Redemption Becomes Official

Sunday, February 25th, 2018

Artis Real Estate Investment Trust has announced (on 2018-2-22):

that it has delivered formal notice to the holder(s) of its Preferred Units, Series C (the “Series C Units”) that, on March 31, 2018, the Trust will redeem all of the 3,000,000 outstanding Series C Units at a price of US$25.328125 (the “Redemption Price”) for each Series C Unit, being US$25.00 plus US$0.328125 in accrued and unpaid distributions thereon up to but excluding March 31, 2018.

The Redemption Price will be payable upon presentation and surrender of the Series C Units called for redemption at the corporate trust offices of AST Trust Company (Canada) at 1 Toronto Street, Suite 1200, Toronto, Ontario, M5C 2V6, Attention: Corporate Actions.

The intention to redeem, but not a commitment, was announced in January.

AX.PR.U is a FixedReset, 5.25%+446, US Pay, ROC, that commenced trading 2012-9-18 after being announced 2012-9-11. It is callable at par on March 31. The issue has not been tracked by HIMIPref™ as it is US-Pay.

February 23, 2018

Friday, February 23rd, 2018
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 0.8454 % 3,042.2
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.8454 % 5,582.4
Floater 3.27 % 3.48 % 95,968 18.50 4 0.8454 % 3,217.1
OpRet 0.00 % 0.00 % 0 0.00 0 0.1969 % 3,156.2
SplitShare 4.71 % 4.03 % 62,921 3.34 5 0.1969 % 3,769.2
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1969 % 2,940.9
Perpetual-Premium 5.45 % 4.95 % 69,736 14.38 20 -0.0539 % 2,828.9
Perpetual-Discount 5.42 % 5.41 % 85,226 14.75 14 0.0063 % 2,935.3
FixedReset 4.25 % 4.63 % 161,658 5.81 102 0.0041 % 2,517.1
Deemed-Retractible 5.15 % 5.71 % 90,127 5.72 28 -0.0962 % 2,905.3
FloatingReset 3.01 % 3.02 % 38,446 3.71 10 -0.0434 % 2,766.9
Performance Highlights
Issue Index Change Notes
TD.PF.C FixedReset -1.12 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-23
Maturity Price : 22.57
Evaluated at bid price : 22.90
Bid-YTW : 4.68 %
TRP.PR.H FloatingReset -1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-23
Maturity Price : 17.07
Evaluated at bid price : 17.07
Bid-YTW : 3.59 %
BAM.PF.G FixedReset 1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-23
Maturity Price : 23.34
Evaluated at bid price : 24.58
Bid-YTW : 4.95 %
SLF.PR.G FixedReset 1.30 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.55
Bid-YTW : 7.18 %
PWF.PR.A Floater 1.51 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-23
Maturity Price : 21.47
Evaluated at bid price : 21.47
Bid-YTW : 2.82 %
Volume Highlights
Issue Index Shares
Traded
Notes
TD.PF.D FixedReset 313,733 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-23
Maturity Price : 23.21
Evaluated at bid price : 24.30
Bid-YTW : 4.82 %
GWO.PR.S Deemed-Retractible 180,060 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.69
Bid-YTW : 5.64 %
PWF.PR.P FixedReset 132,700 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-23
Maturity Price : 19.76
Evaluated at bid price : 19.76
Bid-YTW : 4.43 %
BAM.PR.Z FixedReset 102,933 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-23
Maturity Price : 23.03
Evaluated at bid price : 24.61
Bid-YTW : 5.01 %
GWO.PR.M Deemed-Retractible 96,856 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2018-03-31
Maturity Price : 25.25
Evaluated at bid price : 25.60
Bid-YTW : 0.29 %
HSE.PR.C FixedReset 63,788 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-23
Maturity Price : 23.57
Evaluated at bid price : 24.85
Bid-YTW : 5.17 %
There were 36 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
TRP.PR.H FloatingReset Quote: 17.07 – 17.57
Spot Rate : 0.5000
Average : 0.3219

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-23
Maturity Price : 17.07
Evaluated at bid price : 17.07
Bid-YTW : 3.59 %

TD.PF.C FixedReset Quote: 22.90 – 23.25
Spot Rate : 0.3500
Average : 0.1990

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-23
Maturity Price : 22.57
Evaluated at bid price : 22.90
Bid-YTW : 4.68 %

MFC.PR.K FixedReset Quote: 22.96 – 23.30
Spot Rate : 0.3400
Average : 0.2092

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 22.96
Bid-YTW : 5.69 %

IFC.PR.C FixedReset Quote: 23.68 – 24.10
Spot Rate : 0.4200
Average : 0.3018

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2025-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.68
Bid-YTW : 5.00 %

CM.PR.Q FixedReset Quote: 24.20 – 24.49
Spot Rate : 0.2900
Average : 0.1805

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2048-02-23
Maturity Price : 23.16
Evaluated at bid price : 24.20
Bid-YTW : 4.82 %

EIT.PR.A SplitShare Quote: 25.35 – 25.82
Spot Rate : 0.4700
Average : 0.3610

YTW SCENARIO
Maturity Type : Soft Maturity
Maturity Date : 2024-03-14
Maturity Price : 25.00
Evaluated at bid price : 25.35
Bid-YTW : 4.51 %

ALB.PR.C : Partial Call for Redemption

Friday, February 23rd, 2018

Allbanc Split Corp. II has announced (on 2018-2-15):

that it has called 42,667 Preferred Shares for cash redemption on February 28, 2018 (in accordance with the Company’s Articles of Incorporation, as amended) representing approximately 7.282% of the outstanding Preferred Shares as a result of the special annual retraction of 85,334 Capital Shares by the holders thereof. The Preferred Shares shall be redeemed on a pro rata basis, so that each holder of Preferred Shares of record on February 26, 2018 will have approximately 7.282% of their Preferred Shares redeemed. The redemption price for the Preferred Shares will be $25.67 per share.

Holders of Preferred Shares that are on record for dividends but have been called for redemption will be entitled to receive dividends thereon which have been declared but remain unpaid up to but not including February 28, 2018.

Payment of the amount due to holders of Preferred Shares will be made by the Company on February 28, 2018. From and after February 28, 2018 the holders of Preferred Shares that have been called for redemption will not be entitled to dividends or to exercise any right in respect of such shares except to receive the amount due on redemption.

Allbanc Split Corp. II is a mutual fund corporation created to hold a portfolio of publicly listed common shares of selected Canadian chartered banks. Capital Shares and Preferred Shares of Allbanc Split Corp. II are listed for trading on The Toronto Stock Exchange under the symbols ALB and ALB.PR.C respectively.

ALB.PR.C is a SplitShare “yielding approximately 4.75% annually on the initial issue price”, maturing 2021-2-28, that commenced trading 2016-2-26. It is tracked by HIMIPref™ but relegated to the Scraps index on volume concerns.