PrefBlog

Financial 15 Split Inc. has released its Annual Report to November 30, 2017.

Figures of interest are:

MER: 1.19% of the whole unit value, excluding one time initial offering expenses.

Average Net Assets: We need this to calculate portfolio yield. MER of 1.19% Total Expenses of 5,868,070 implies $493-million net assets. Preferred Share distributions of 12,976,652 @ 0.525 / share implies 24.7-million shares out on average. Average Unit Value (beginning & end of year) = (18.32 + 17.18) / 2 = 17.75. Therefore 24.7-million @ 17.75 = 438-million average net assets. Rotten agreement between these two methods, but they did have a lot of treasury offerings this year. Give 75% weight to the first calculation and call it 479-million average.

Underlying Portfolio Yield: Dividends received (net of withholding) of 11,739,373 divided by average net assets of 479-million is 2.45%

Income Coverage: Net Investment Income of 5,871,303 divided by Preferred Share Distributions of 12,976,652 is 45%.

Industrial Alliance Insurance and Financial Services Inc. has announced:

that it has closed its previously announced bought deal public offering of 2,500,000 common shares (the “Common Shares”) at a price of $54.10 per Common Share, for gross proceeds of $135,250,000 and its previously announced concurrent bought deal public offering of 6,000,000 Non-Cumulative 5-Year Rate Reset Class A Preferred Shares Series I (the “Series I Preferred Shares”) at a price of $25.00 per Series I Preferred Share, for gross proceeds of $150,000,000. Both offerings were purchased by a syndicate of underwriters co-led by TD Securities Inc. and National Bank Financial Inc., and which also included RBC Capital Markets, Scotiabank, BMO Capital Markets, CIBC Capital Markets and Industrial Alliance Securities Inc.

The Series I Preferred Shares have been rated “Pfd-2(High)” by DBRS Limited and “A-/P-1(Low)” by Standard & Poor’s and have been listed on the Toronto Stock Exchange under the symbol “IAG.PR.I”.

The Common Shares and the Series I Preferred Shares were issued under two distinct prospectus supplements each dated February 28, 2018 to the Company’s short form base shelf prospectus dated June 22, 2017. Details of each offering are set out in the respective prospectus supplements which are available on the Company’s profile on SEDAR at www.sedar.com.

IAG.PR.I is a FixedReset, 4.80%+275, announced 2018-2-26. It will be tracked by HIMIPref™ and assigned to the FixedResets subindex.

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).

IAG.PR.I traded 382,460 shares today in a range of 24.84-99 before closing at 24.90-95. Vital statistics are:

This issue wasn’t all that badly priced on issue date, but now looks rich. 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 23.53-64, down substantially from the 24.15-22 quote on IAG.PR.I’s announcement date. 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; on announcement date this correction meant the issues were reasonably close to being fairly-priced relative to each other, but the large drop in the IAG.PR.G quote means that it is now cheap relative to the new issue. The yields to the Deemed Maturity 2025-1-31 are 5.15% for IAG.PR.G and 4.89% for the new issue, after accounting for resets at the current GOC-5 level.

Manulife Financial Corporation has announced (on March 6):

that after having taken into account all election notices received by the March 5, 2018 deadline for conversion of its currently outstanding 8,000,000 Non-cumulative Rate Reset Class 1 Shares Series 11 (the “Series 11 Preferred Shares”) (TSX: MFC.PR.J) into Non-cumulative Floating Rate Class 1 Shares Series 12 of Manulife (the “Series 12 Preferred Shares”), the holders of Series 11 Preferred Shares are not entitled to convert their Series 11 Preferred Shares into Series 12 Preferred Shares. There were 203,586Series 11 Preferred Shares elected for conversion, which is less than the minimum one million shares required to give effect to conversions into Series 12 Preferred Shares.

As announced by Manulife on February 20, 2018, after March 19, 2018, holders of Series 11 Preferred Shares will be entitled to receive fixed rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of Manulife and subject to the provisions of the Insurance Companies Act (Canada). The dividend rate for the five-year period commencing on March 20, 2018, and ending on March 19, 2023, will be 4.73100% per annum or $0.295688 per share per quarter, being equal to the sum of the five-year Government of Canada bond yield as at February 20, 2018, plus 2.61%, as determined in accordance with the terms of the Series 11 Preferred Shares.

Subject to certain conditions described in the prospectus supplement dated November 27, 2012 relating to the issuance of the Series 11 Preferred Shares, Manulife may redeem the Series 11 Preferred Shares, in whole or in part, on March 19, 2023 and on March 19 every five years thereafter.

It will be recalled that MFC.PR.J will reset to 4.731% effective 2018-3-20 and will hence be referred to as a FixedReset, 4.731%+261.

MFC.PR.J 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).

It will be further recalled that I recommended against conversion.