PrefBlog

CC&L Group has announced:

the implementation of restructuring initiatives by Connor, Clark & Lunn Capital Markets Inc. (the “Manager”) and Connor, Clark & Lunn Investment Management Ltd. (the “Investment Manager”) which acts as investment manager to Credit Trust III. Credit Trust III owns the credit linked note issued by TD Bank to which the Company has exposure. The initiatives have been undertaken in order to increase the likelihood that the Company will be able to repay the $25.00 preferred share issue price at maturity.

In this regard:

1. The trading reserve account has been used to buy additional subordination in the credit linked note (additional subordination increases the “safety cushion” by increasing the number of defaults the reference portfolio can withstand before principal and interest payments on the note are adversely affected).

2. For the next three quarters the coupons on the credit linked note have been sold to TD Bank in exchange for additional subordination. As a result, dividends on the preferred shares of the Company have been suspended commencing with the December 31, 2008 dividend. Regular quarterly dividends are expected to be re-instated in respect of the quarter ending September 30, 2009. The manager will ask Standard & Poors to withdraw its rating on the preferred shares as the rating applies to the payment of all dividends.

3. The deferred management fee has been made available for the benefit of the preferred shareholders.

The following pay-off table is provided:

According to the company, there were 125 names in the portfolio as of September 30, of which 5 have defaulted. The non-defaulted issues have the credit distribution:

The NAV is $2.97 as of October 31. Interestingly, the prospectus includes the language:

Preferred Shares may be surrendered for retraction at any time but will be retracted only on the last day of the month (a ‘‘Valuation Date’’) commencing June 30, 2005. Preferred Shares surrendered for retraction by a Holder at least five (5) Business Days prior to a Valuation Date will be retracted on such Valuation Date and such holder will receive payment on or before the tenth Business Day following such Valuation Date. On a retraction, Holders will be entitled to receive a retraction price per share (the ‘‘Preferred Share Retraction Price’’) equal to 95% of the net asset value per Preferred Share determined as of the relevant Valuation Date less $0.25. As this Preferred Share Retraction Price may be less than $25.00 and will vary depending on the net asset value at the time of retraction, the S&P rating of the Preferred Shares does not extend to the amount payable on a retraction. See ‘‘Details of the Offering — Certain Provisions of the Preferred Shares — Retraction’’ and ‘‘Details of the Offering — Suspension of Redemption or Retractions of Preferred Shares’’.

The issue’s closing quote today was 1.70-75, 3×87. The TSX reports 10.248-million shares currently outstanding, a slight decline from the 10.342-million shares outstanding as of June 30. Shares redeemed in the twelve months to June 2008 were 18,900.

I’m not aware of redemptions having been suspended … but anyone drooling at the arbitrage had better check!

RPB.PR.A is not tracked by HIMIPref™. It was last mentioned on PrefBlog in connection with the Fannie/Freddie Credit Event.

This entry was posted on Thursday, November 6th, 2008 at 7:40 pm and is filed under Issue Comments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.