PrefBlog

Royal Bank of Canada has announced:

that it does not intend to exercise its right to redeem all or any part of the currently outstanding Non-Viability Contingent Capital (NVCC) Non-Cumulative 5-Year Rate Reset First Preferred Shares, Series BB (the “Series BB shares”) on August 24, 2019. There are currently 20,000,000 Series BB shares outstanding.

Subject to certain conditions set out in the prospectus supplement dated May 27, 2014 relating to the issuance of the Series BB shares, the holders of the Series BB shares have the right to convert all or part of their Series BB shares, on a one-for-one basis, into NVCC Non-Cumulative Floating Rate First Preferred Shares, Series BC (the “Series BC shares”) on August 24, 2019. On such date, holders who do not exercise their right to convert their Series BB shares into Series BC shares, will continue to hold their Series BB shares. The conversion will occur on August 26 being the first business day following the conversion date of August 24 as identified in the prospectus, which falls on a Saturday. The foregoing conversion rights are subject to the following:

• if Royal Bank of Canada determines that there would be less than 1,000,000 Series BC shares outstanding after taking into account all shares tendered for conversion on August 24, 2019, then holders of Series BB shares will not be entitled to convert their shares into Series BC shares, and
• alternatively, if Royal Bank of Canada determines that there would remain outstanding less than 1,000,000 Series BB shares after August 24, 2019, then all remaining Series BB shares will automatically be converted into Series BC shares on a one-for-one basis on August 24, 2019.

In either case, Royal Bank of Canada will give written notice to that effect to holders of Series BB shares no later than August 17, 2019.

The dividend rate applicable for the Series BB shares for the 5-year period from and including August 24, 2019 to but excluding August 24, 2024, and the dividend rate applicable to the Series BC shares for the 3-month period from and including August 24, 2019 to but excluding November 24, 2019, will be determined and announced by way of a press release on July 25, 2019.

Beneficial owners of Series BB shares who wish to exercise their conversion rights should instruct their broker or other nominee to exercise such rights during the conversion period, which runs from July 25, 2019 until 5:00 p.m. (EST) on August 9, 2019.

Inquiries should be directed to Shareholder Relations Officer, Shirley Boudreau, at 416-955-7806.

RY.PR.H is a FixedReset, 3.90%+226, NVCC-Compliant issue that commenced trading 2014-6-3 after being announced 2014-5-23. The issue is tracked by HIMIPref™ and has been assigned to the FixedReset-Discount subindex.

I will have more to say when the reset rate is announced July 25.

DBRS has announced that it:

placed Sun Life Financial Inc.’s (SLF or the Company) Issuer Rating and Senior Unsecured Debentures rating of “A” as well as its Subordinated Unsecured Debentures rating of A (low) and Preferred Shares rating of Pfd-2 Under Review with Positive Implications. DBRS also placed Sun Life Assurance Company of Canada’s (Sun Life Assurance or SLA) Financial Strength Rating and Issuer Rating of AA (low) as well as its Subordinated Debt rating of A (high) Under Review with Positive Implications. Additionally, DBRS placed Sun Life Capital Trust’s SLEECS Series B rating and Sun Life Capital Trust II’s SLEECS Series 2009-1 rating of “A” Under Review with Positive Implications.

KEY RATING CONSIDERATIONS
The Under Review with Positive Implications status reflects DBRS’s view that the Company has been making good progress in realizing benefits from its strategic business plan to diversify and balance its business mix to improve the quality of its earnings. Furthermore, SLF has had greater success than DBRS anticipated in addressing legacy items and improving its risk profile, placing the Company’s credit profile closer to its AA-rated peers. During the review period, which is expected to be concluded within 90 days, DBRS will focus on the Company’s improved ability to deliver sustained earnings commensurate with the higher rating level across its four core business segments while simultaneously maintaining strong regulatory capital levels.

DBRS has gained comfort from actions taken by management over the past year to turn around the performance of SLF’s legacy U.S. individual life block that is in run-off, including the reserve strengthening, which should reduce the probability of the block adversely impacting results. DBRS has also taken into account measures taken by the Company to manage its risk associated with having a higher proportion of mortgages, BBB-rated bonds and corporate loans in the Company’s investment portfolio. Overall, the investment portfolio is delivering investment yields near the 4% range and has contributed to SLF’s strong and stable earnings performance in recent years.

RATING DRIVERS
The ratings could be upgraded if SLF continues to generate consistent earnings across its four core business segments commensurate with the higher rating level while maintaining its strong capitalization and progress in strengthening its franchise.

As the ratings have the Under Review with Positive Implications status, a negative rating action is unlikely. However, the trends on the ratings could revert to Stable if the Canadian operations weaken materially or if an adverse event causes regulatory capital to decline substantially.

Affected issues are SLF.PR.A, SLF.PR.B, SLF.PR.C, SLF.PR.D, SLF.PR.E, SLF.PR.G, SLF.PR.H, SLF.PR.I, SLF.PR.J and SLF.PR.K .

Standard & Poor’s has announced:

• iA Financial Group (iA) has a meaningful presence in Canada and an increasingly diverse earnings profile supported by strong risk-adjusted returns versus its internal targets and peers’ performance.
• It also has excellent capital adequacy per our risk-based model.
• We are raising our ratings on iA’s nonoperating holding company, iA Financial Corp. Inc., to ‘A’ from ‘A-‘ and its operating subsidiary, Industrial Alliance Insurance and Financial Services to ‘AA-‘ from ‘A+’.
• The outlook is stable reflecting our expectation that iA can maintain current levels of capital while further diversifying its earnings profile and returns.

NEW YORK (S&P Global Ratings) July 22, 2019– S&P Global Ratings said today it raised its financial strength rating (FSR) on Industrial Alliance Insurance and Financial Services Inc. (iA Insurance) to ‘AA-‘ from ‘A+’. At the same time, we raised our long-term issuer credit rating on iA Financial Group’s (iA) nonoperating holding company (NOHC) iA Financial Corp. Inc. to ‘A’ from ‘A-‘. The outlook is stable.

This rating action follows our review of iA under our revised criteria.

The stable outlook reflects the group’s maintenance of a comfortable capital redundancy at the ‘AAA’ level per our model, leading to top-quartile results vis-à-vis peers offering similar products. We do not expect to revise the ratings in the next two years.

While unlikely in the next two years, we could lower our ratings on iA if its:

• Competitive position deteriorates, perhaps due to an unexpected weakening of its brand or a significant decline in sales; or
• Capital adequacy weakens to below our ‘AA’ confidence level along with a substantial increase in unhedged exposure to market or interest rate risk.

We believe a further upgrade is unlikely in the next two years.

iA Insurance earns strong returns compared with many U.S. life insurers and Canadian peers that compete globally. Its asset management operations have grown and contribute meaningfully to earnings. Although its investment portfolio is somewhat concentrated in highly rated Canadian provincial bonds and nearly all of its business is conducted in Canada, we view iA’s insurance industry and country risk assessment (IICRA) as lower risk than its globally diversified Canadian peers and U.S. life insurers offering similar products. Its operating performance has been in the top quartile versus peers’ in the past few years and appears to be sustainable. Therefore, we view iA Insurance’s business risk profile as strong and improving.

The preferreds are now rated A (Global Scale), up from A-, and P-1(low) (Canadian Scale) (Unchanged).

Affected issues are: IAF.PR.B, IAF.PR.G and IAF.PR.I

The Toronto-Dominion Bank has announced:

that none of its 20 million Non-Cumulative 5-Year Rate Reset Preferred Shares, Series 3 (Non-Viability Contingent Capital (NVCC)) (the “Series 3 Shares”) will be converted on July 31, 2019 into Non-Cumulative Floating Rate Preferred Shares, Series 4 (NVCC) (the “Series 4 Shares”) of TD.

During the conversion period, which ran from July 2, 2019 to July 16, 2019, 350,885 Series 3 Shares were tendered for conversion into Series 4 Shares, which is less than the minimum 1,000,000 shares required to give effect to the conversion, as described in the prospectus supplement for the Series 3 Shares dated July 24, 2014. As a result, no Series 4 Shares will be issued on July 31, 2019 and holders of Series 3 Shares will retain their Series 3 Shares.

The Series 3 Shares are currently listed on the Toronto Stock Exchange under the symbol TD.PF.B. As previously announced on July 2, 2019, the dividend rate for the Series 3 Shares for the 5 year period from and including July 31, 2019 to but excluding July 31, 2024 will be 3.681%.

TD.PF.B is a FixedReset 3.80%+227, NVCC-compliant, issue that commenced trading 2014-7-31 after being announced 2014-7-22. TD provided notice of extension on 2019-6-25. The issue will reset At 3.681% effective July 31, 2019. I recommended against conversion. The issue is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

The Canadian Imperial Bank of Commerce has announced:

that, during the conversion notice period which ran from July 1, 2019 to July 16, 2019, 350,312 Non-cumulative Rate Reset Class A Preferred Shares Series 39 (Non-Viability Contingent Capital (NVCC)) of CIBC (the “Series 39 Shares”) were tendered for conversion, on a one-for-one basis, into Non-cumulative Floating Rate Class A Preferred Shares Series 40 (Non-Viability Contingent Capital (NVCC)) of CIBC (the “Series 40 Shares”). As per the conditions set out in the prospectus supplement dated June 2, 2014 relating to the issuance of the Series 39 Shares, since less than 1,000,000 Series 40 Shares would be outstanding on July 31, 2019, holders of Series 39 Shares who tendered their Series 39 Shares for conversion will not be entitled to convert their shares into Series 40 Shares. As a result, Series 40 Shares will not be issued at this time.

On July 31, 2019, CIBC will have 16,000,000 Series 39 Shares issued and outstanding. The Series 39 Shares are currently listed on the Toronto Stock Exchange under the symbol CM.PR.O.

The quarterly fixed dividend rate applicable to the Series 39 Shares for the five-year period from and including July 31, 2019 to but excluding July 31, 2024 is 3.713%, payable quarterly as and when declared by the Board of Directors of CIBC.

CM.PR.O is a FixedReset, 3.90%+232, NVCC-compliant, that commenced trading 2014-6-11 after being announced 2014-6-2. The extension was announced 2019-6-12. The issue will reset At 3.713% effective July 31, 2019. I recommended against conversion. CM.PR.O is tracked by HIMIPref™ and is assigned to the FixedReset (Discount) subindex.

Brookfield Renewable Partners L.P. has announced:

that after having taken into account all election notices received by the July 16, 2019 deadline for conversion of Brookfield Renewable Power Preferred Equity Inc.’s (“BRP Equity”) currently outstanding Class A Preference Shares, Series 3 (the “Series 3 Shares”) (TSX: BRF.PR.C) into Class A Preference Shares, Series 4 (the “Series 4 Shares”), no Series 3 Shares will be converted into Series 4 Shares. As of the July 31, 2019 conversion date, there would have been fewer than the minimum 1,000,000 Series 4 Shares outstanding required to give effect to the conversion.

As announced by Brookfield Renewable on July 2, 2019, after July 31, 2019, holders of the Series 3 Shares will be entitled to receive fixed quarterly dividends, as and when declared by the board of directors of BRP Equity. The dividend rate for the five-year period commencing on August 1, 2019 and ending July 31, 2024 will be 4.351% per annum ($0.2719375 per share per quarter).

BRF.PR.C is a FixedReset, 4.40%+294, that commenced trading 2010-10-11 after being announced 2010-10-1. The issue will reset at 4.351% effective August 1, 2019. I recommended against conversion. The issue has been tracked by HIMIPref™, but assigned to the Scraps – FixedReset (Discount) subindex on credit concerns.