There are a few more details on the persecution of S&P:
The U.S. is seeking as much as $5 billion in penalties from McGraw-Hill Cos. (MHP) and its Standard & Poor’s unit as punishment for inflated credit ratings that Attorney General Eric Holder said were central to the worst financial crisis since the Great Depression.
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The Justice Department probe, code-named “Alchemy,” began in November, 2009. The suit marked the culmination of a “massive, multiyear investigation” by a team of almost two dozen lawyers, Stuart Delery, principal deputy assistant attorney general said.Over the course of the investigation, the company turned over more than 20 million pages of documents, which included e- mail between the firm’s employees, said a person familiar with the probe, who asked for anonymity to discuss details. Those e- mails, along with questions about the models used by the company to rate bonds, have become the basis for the department’s lawsuit.
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According to the U.S. complaint, S&P falsely represented to investors that its credit ratings were objective, independent and uninfluenced by any conflicts of interests.The company bent rating models to suit its business needs to the extent that one CDO analyst commented that loosening the measure of default risk for a certain security in 2006 “resulted in a loophole in S&P’s rating model big enough to drive a Mack truck through,” the U.S. said.
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The Justice Department cited e-mail from S&P employees discussing the need to modify ratings criteria to win business after the company’s grades were more conservative than competitors.“Losing one or even several deals due to criteria issues, but this is so significant that it could have an impact on future deals,” one analyst said in a May 2004 e-mail cited in the lawsuit. “There’s no way we can get back on this one but we need to address this now in preparation for future deals.”
So now the word will go out from Legal – if it hasn’t already – that any dissent or commentary running contrary to the corporate line on default models will be grounds for dismissal. This will improve credit ratings significantly!
As S&P says:
“There was robust internal debate within S&P about how a rapidly deteriorating housing market might affect the CDOs — and we applied the collective judgment of our committee-based system in good faith. The email excerpts cherry picked by DOJ have been taken out of context, are contradicted by other evidence, and do not reflect our culture, integrity or how we do business.
“The DOJ omits important context about the emails it cites. For example, the email that says deals ‘could be structured by cows’ and be rated by S&P had nothing to do with RMBS or CDO ratings or any S&P model, and the analyst had her concerns addressed with the issuer before S&P issued any rating. The DOJ also cites the fact that S&P personnel discussed proposed rating criteria with market participants as evidence of wrongdoing although under certain recent regulations, S&P is required to do just that. When the full facts are revealed in court, it will be clear the emails and anecdotes being cited do not prove any wrongdoing.
Gaz Metro secured some long term USD financing:
Gaz Métro inc. (“GMi”) announced today that it has entered into an agreement to sell to certain institutional investors in the United States on a private placement basis U.S.$200 million aggregate principal amount of 4.04% senior secured notes due 2043 and 4.19% senior secured notes due 2048 (together, the “Notes”). The Notes will be secured by a guarantee as to payment of principal and interest by Gaz Métro Limited Partnership (“Gaz Métro”), together with collateral security backed by the assets of GMi and Gaz Métro.
Not bad! and only 85-90bp over Treasuries! That’s the equivalent of financing at 3.50% in Canada!
There might be some adjustments to milkfare:
The Canadian government is prepared to knock holes in the hefty tariff walls shielding dairy producers from foreign competition and admit more European cheese into this country in return for greater access to EU markets for Canada’s beef and pork.
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About 20,400 tonnes of foreign cheese currently enter Canada tariff-free annually under special arrangements with jurisdictions such as the European Union. The EU, which already has the lion’s share of this tariff-free access, is allowed to import about 13,400 tonnes of cheese annually under this deal. That’s more than 3 per cent of Canada’s current annual cheese consumption.The EU is looking for as much as 10,000 tonnes more of annual tariff-free access for cheese, Canadian dairy industry sources say, adding they do not believe Ottawa would agree to this size of this concession. The Canadian government declined to confirm this number or how much it’s prepared to offer up as part of negotiations.
This would be wonderful news for Canadian consumers if true. Remember the 30-million consumers? They’re rather more numerous than the 30,000 (?) producers.
It was a good day for the Canadian preferred share market, with PerpetualPremiums winning 20bp, FixedResets gaining 9bp and DeemedRetractibles up 13bp. Volatility was minimal. Volume was high.
| 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 | 0.3659 % | 2,569.7 |
| FixedFloater | 4.19 % | 3.51 % | 27,162 | 18.31 | 1 | 0.1326 % | 3,879.2 |
| Floater | 2.59 % | 2.91 % | 67,193 | 19.92 | 5 | 0.3659 % | 2,774.6 |
| OpRet | 4.75 % | 1.54 % | 36,243 | 0.32 | 5 | 0.3221 % | 2,606.5 |
| SplitShare | 4.57 % | 4.41 % | 41,120 | 4.27 | 2 | 0.0994 % | 2,917.0 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.3221 % | 2,383.4 |
| Perpetual-Premium | 5.23 % | -2.22 % | 88,726 | 0.09 | 29 | 0.2034 % | 2,356.4 |
| Perpetual-Discount | 4.85 % | 4.89 % | 142,944 | 15.65 | 4 | 0.1729 % | 2,646.9 |
| FixedReset | 4.90 % | 2.86 % | 272,806 | 3.38 | 78 | 0.0938 % | 2,488.7 |
| Deemed-Retractible | 4.87 % | 1.62 % | 140,257 | 0.29 | 45 | 0.1311 % | 2,435.1 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| IGM.PR.B | Perpetual-Premium | 1.54 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2014-12-31 Maturity Price : 26.00 Evaluated at bid price : 27.07 Bid-YTW : 3.49 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BAM.PR.J | OpRet | 152,075 | RBC crossed 145,700 at 27.05. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-03-31 Maturity Price : 26.00 Evaluated at bid price : 27.21 Bid-YTW : 1.54 % |
| TD.PR.Y | FixedReset | 109,000 | RBC crossed 50,000 at 25.13; National crossed 50,000 at the same price. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.14 Bid-YTW : 3.25 % |
| CM.PR.M | FixedReset | 90,342 | RBC crossed blocks of 50,000 and 38,000, both at 26.63. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-07-31 Maturity Price : 25.00 Evaluated at bid price : 26.66 Bid-YTW : 2.04 % |
| MFC.PR.I | FixedReset | 58,225 | RBC crossed 49,000 at 26.20. YTW SCENARIO Maturity Type : Call Maturity Date : 2017-09-19 Maturity Price : 25.00 Evaluated at bid price : 26.17 Bid-YTW : 3.45 % |
| BAM.PR.P | FixedReset | 55,382 | Scotia crossed 40,000 at 26.90; TD crossed 10,000 at the same price. YTW SCENARIO Maturity Type : Call Maturity Date : 2014-09-30 Maturity Price : 25.00 Evaluated at bid price : 26.91 Bid-YTW : 2.69 % |
| BAM.PF.A | FixedReset | 52,501 | National crossed 50,000 at 26.15. YTW SCENARIO Maturity Type : Call Maturity Date : 2018-09-30 Maturity Price : 25.00 Evaluated at bid price : 26.15 Bid-YTW : 3.70 % |
| There were 49 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TRI.PR.B | Floater | Quote: 23.55 – 24.46 Spot Rate : 0.9100 Average : 0.7412 YTW SCENARIO |
| CU.PR.C | FixedReset | Quote: 26.27 – 26.50 Spot Rate : 0.2300 Average : 0.1561 YTW SCENARIO |
| BNA.PR.E | SplitShare | Quote: 25.70 – 25.95 Spot Rate : 0.2500 Average : 0.1777 YTW SCENARIO |
| RY.PR.I | FixedReset | Quote: 25.52 – 25.70 Spot Rate : 0.1800 Average : 0.1165 YTW SCENARIO |
| BAM.PR.C | Floater | Quote: 18.05 – 19.00 Spot Rate : 0.9500 Average : 0.8998 YTW SCENARIO |
| GWO.PR.Q | Deemed-Retractible | Quote: 25.86 – 26.00 Spot Rate : 0.1400 Average : 0.0989 YTW SCENARIO |