March 14, 2019

DBRS published some interesting commentaries today; the first was on the Brookfield acquisition of Oaktree:

DBRS Limited (DBRS) notes that Brookfield Asset Management Inc. (BAM or the Company; rated A (low) with a Stable trend by DBRS) and Oaktree Capital Group, LLC (Oaktree Capital) have entered into an acquisition agreement whereby BAM will acquire approximately 62% of the Oaktree Capital business (the Acquisition). DBRS does not expect the Acquisition to have a material impact on BAM’s credit profile.

The Acquisition is expected to have a modestly positive impact on BAM’s business risk profile, reflecting the following factors: (1) the Oaktree Capital acquisition will result in an increase in BAM’s AUM to approximately $475 billion from $355 billion at the end of 2018; (2) the Acquisition will increase cash flow from low-risk, growing fees on fee-bearing-capital; (3) the Acquisition will broaden BAM’s product offerings, product diversification and client-base diversification; and (4) Oaktree Capital has strong credit quality in the “A” range, as indicated by other rating agencies.

FINANCING PLAN
BAM intends to finance the total consideration price through 50% common equity issuance and 50% cash. With respect to the cash financing part, DBRS does not expect there will be any material issues for BAM.

DBRS believes that BAM’s 2018 credit metrics were solid for the current ratings and DBRS expect them to stay well within DBRS’s requirements for the A (low) rating range following the closing of the Acquisition (funds from operations (FFO)/corporate debt of 35% and cash flow/corporate debt of 30%). As such, based on the total Acquisition consideration and the financing plan as currently proposed by the Company, DBRS does not expect the Acquisition to have any material impact on its credit profile.

The second was with respect to Element Fleet Management Corp.:

  • • Element Fleet Management Corp. (EFN or the Company) reported net income of $41.1 million for 4Q18, on an IFRS basis, up from a net loss of $1.5 million for the year ago period. Robust origination volumes drove net interest and rental revenue, which was partially offset by lower service revenue due to lower gains on vehicle sales in the Company’s Australian and New Zealand operations and higher financing costs. Excluding restructuring, acquisition costs and other non-cash expenses, adjusted net income for the quarter totaled $68.1 million, a 4% year-over-year (YoY) decline.
  • • Actions designed to improve Element’s long-term earnings generation capacity and to restore the health of the core fleet management business were advanced during the quarter. The Company completed 65 projects and enacted actions that will improve the Company’s earnings ability by $58 million on an annual run rate basis. This was 45% above the plan’s target. Meanwhile, customer retention improved to historical levels. Strong customer renewal rates and solid organic growth resulted in origination volumes to improve 24.5% YoY to $1.8 billion.
  • • During the quarter, Element made good headway in the repositioning of the troubled 19th Capital business. A new leadership team for the business was in place as of year-end and has developed a detailed plan to run-off the business and sell idle assets. Demonstrating solid progress in the repositioning, the 19th Capital business was breakeven in 4Q18. Further, Element estimates that it will realize $100 million of the $260 million of residual value in the business by year-end 2019.
  • • The balance sheet was fortified during the quarter by several actions designed to afford the Company the ability to absorb the costs of the transformation plan. Element raised $345 million of common equity, reduced its dividend by 40% and implemented a dividend reinvestment plan. Subsequent to year-end, Element completed the sale of its Eden Prairie, MN facilities and is in advanced talks to sell the ECAF non-core asset. As a result, tangible leverage was reduced to 7.79x at year-end 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 1.8041 % 2,159.3
FixedFloater 0.00 % 0.00 % 0 0.00 0 1.8041 % 3,962.2
Floater 5.42 % 5.63 % 47,875 14.49 3 1.8041 % 2,283.4
OpRet 0.00 % 0.00 % 0 0.00 0 0.1342 % 3,276.4
SplitShare 4.88 % 4.65 % 69,753 3.91 8 0.1342 % 3,912.7
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.1342 % 3,052.9
Perpetual-Premium 5.65 % 4.72 % 57,385 0.09 9 -0.0263 % 2,915.2
Perpetual-Discount 5.48 % 5.65 % 70,035 14.35 26 0.3365 % 3,041.6
FixedReset Disc 5.18 % 5.40 % 204,199 14.81 64 0.4304 % 2,200.1
Deemed-Retractible 5.31 % 6.07 % 94,304 8.19 27 0.2533 % 3,021.5
FloatingReset 4.19 % 4.25 % 45,487 2.75 5 0.1297 % 2,405.8
FixedReset Prem 5.08 % 4.02 % 327,810 2.26 19 0.2234 % 2,564.3
FixedReset Bank Non 1.98 % 4.03 % 161,656 2.77 3 0.1531 % 2,634.5
FixedReset Ins Non 5.00 % 6.62 % 120,631 8.35 22 0.6703 % 2,255.0
Performance Highlights
Issue Index Change Notes
BAM.PF.J FixedReset Disc -1.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 22.53
Evaluated at bid price : 23.30
Bid-YTW : 5.08 %
IGM.PR.B Perpetual-Premium -1.02 % YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-04-13
Maturity Price : 25.00
Evaluated at bid price : 25.19
Bid-YTW : 4.72 %
IAF.PR.G FixedReset Ins Non 1.00 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.20
Bid-YTW : 6.78 %
GWO.PR.N FixedReset Ins Non 1.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.85
Bid-YTW : 8.65 %
RY.PR.S FixedReset Disc 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 21.80
Evaluated at bid price : 22.23
Bid-YTW : 4.79 %
GWO.PR.H Deemed-Retractible 1.06 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.90
Bid-YTW : 6.46 %
MFC.PR.F FixedReset Ins Non 1.09 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 14.80
Bid-YTW : 8.75 %
SLF.PR.B Deemed-Retractible 1.11 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 21.80
Bid-YTW : 6.46 %
BMO.PR.S FixedReset Disc 1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 19.65
Evaluated at bid price : 19.65
Bid-YTW : 5.14 %
RY.PR.H FixedReset Disc 1.19 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 19.55
Evaluated at bid price : 19.55
Bid-YTW : 5.07 %
TD.PF.B FixedReset Disc 1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 19.25
Evaluated at bid price : 19.25
Bid-YTW : 5.19 %
RY.PR.M FixedReset Disc 1.21 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 20.85
Evaluated at bid price : 20.85
Bid-YTW : 5.12 %
TD.PF.E FixedReset Disc 1.23 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 21.71
Evaluated at bid price : 22.16
Bid-YTW : 5.07 %
BIP.PR.F FixedReset Disc 1.25 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 21.50
Evaluated at bid price : 21.80
Bid-YTW : 5.85 %
CM.PR.S FixedReset Disc 1.28 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 20.65
Evaluated at bid price : 20.65
Bid-YTW : 5.17 %
BAM.PR.M Perpetual-Discount 1.29 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 20.60
Evaluated at bid price : 20.60
Bid-YTW : 5.79 %
BMO.PR.T FixedReset Disc 1.30 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 18.75
Evaluated at bid price : 18.75
Bid-YTW : 5.26 %
SLF.PR.I FixedReset Ins Non 1.32 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.70
Bid-YTW : 6.45 %
BAM.PR.R FixedReset Disc 1.39 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 16.45
Evaluated at bid price : 16.45
Bid-YTW : 5.86 %
BAM.PF.A FixedReset Disc 1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 21.35
Evaluated at bid price : 21.35
Bid-YTW : 5.52 %
GWO.PR.I Deemed-Retractible 1.47 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.75
Bid-YTW : 6.74 %
BMO.PR.W FixedReset Disc 1.47 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 18.65
Evaluated at bid price : 18.65
Bid-YTW : 5.26 %
TD.PF.K FixedReset Disc 1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 21.62
Evaluated at bid price : 21.95
Bid-YTW : 5.04 %
NA.PR.G FixedReset Disc 1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 21.59
Evaluated at bid price : 21.92
Bid-YTW : 5.26 %
PWF.PR.T FixedReset Disc 1.54 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 19.77
Evaluated at bid price : 19.77
Bid-YTW : 5.18 %
BAM.PF.C Perpetual-Discount 1.68 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 21.10
Evaluated at bid price : 21.10
Bid-YTW : 5.77 %
IFC.PR.C FixedReset Ins Non 1.79 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 19.00
Bid-YTW : 7.29 %
BAM.PR.B Floater 1.81 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 12.29
Evaluated at bid price : 12.29
Bid-YTW : 5.63 %
CU.PR.C FixedReset Disc 1.86 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 18.65
Evaluated at bid price : 18.65
Bid-YTW : 5.34 %
VNR.PR.A FixedReset Disc 1.89 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 21.05
Evaluated at bid price : 21.05
Bid-YTW : 5.45 %
MFC.PR.N FixedReset Ins Non 2.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 18.72
Bid-YTW : 7.38 %
SLF.PR.H FixedReset Ins Non 2.02 % YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 17.65
Bid-YTW : 7.58 %
BAM.PR.K Floater 4.03 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 12.28
Evaluated at bid price : 12.28
Bid-YTW : 5.63 %
Volume Highlights
Issue Index Shares
Traded
Notes
TRP.PR.J FixedReset Prem 205,150 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-05-31
Maturity Price : 25.00
Evaluated at bid price : 25.85
Bid-YTW : 4.02 %
TRP.PR.D FixedReset Disc 201,334 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 17.88
Evaluated at bid price : 17.88
Bid-YTW : 5.75 %
RY.PR.H FixedReset Disc 153,055 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 19.55
Evaluated at bid price : 19.55
Bid-YTW : 5.07 %
NA.PR.S FixedReset Disc 108,170 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 18.76
Evaluated at bid price : 18.76
Bid-YTW : 5.49 %
TD.PF.H FixedReset Prem 103,792 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2021-10-31
Maturity Price : 25.00
Evaluated at bid price : 25.66
Bid-YTW : 4.03 %
BNS.PR.Z FixedReset Bank Non 102,757 YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 23.96
Bid-YTW : 4.03 %
CU.PR.G Perpetual-Discount 101,897 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 20.60
Evaluated at bid price : 20.60
Bid-YTW : 5.51 %
BIP.PR.B FixedReset Disc 100,030 YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-12-31
Maturity Price : 25.00
Evaluated at bid price : 24.95
Bid-YTW : 5.49 %
There were 47 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
BAM.PF.J FixedReset Disc Quote: 23.30 – 23.80
Spot Rate : 0.5000
Average : 0.3414

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 22.53
Evaluated at bid price : 23.30
Bid-YTW : 5.08 %

IAF.PR.B Deemed-Retractible Quote: 20.95 – 21.38
Spot Rate : 0.4300
Average : 0.2885

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2030-01-31
Maturity Price : 25.00
Evaluated at bid price : 20.95
Bid-YTW : 6.73 %

BMO.PR.C FixedReset Disc Quote: 23.55 – 24.00
Spot Rate : 0.4500
Average : 0.3303

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 22.73
Evaluated at bid price : 23.55
Bid-YTW : 5.21 %

IGM.PR.B Perpetual-Premium Quote: 25.19 – 25.49
Spot Rate : 0.3000
Average : 0.1826

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2019-04-13
Maturity Price : 25.00
Evaluated at bid price : 25.19
Bid-YTW : 4.72 %

BAM.PR.T FixedReset Disc Quote: 16.40 – 16.86
Spot Rate : 0.4600
Average : 0.3672

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 16.40
Evaluated at bid price : 16.40
Bid-YTW : 5.95 %

BMO.PR.D FixedReset Disc Quote: 22.75 – 23.14
Spot Rate : 0.3900
Average : 0.3076

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-03-14
Maturity Price : 22.24
Evaluated at bid price : 22.75
Bid-YTW : 5.24 %

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