CC&L Group announced on March 31:
ROC Pref II Corp., ROC Pref III Corp. and Connor, Clark & Lunn ROC Pref Corp. (collectively the “Companies”) announced that the decision by Idearc Inc. to voluntarily file petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code is expected to constitute a credit event under the credit linked note (“CLN”) issued by their respective counterparties.
Idearc was created through a spin-off from Verizon Communications Inc. in November 2006. The Reference Portfolios of the Companies have exposure to Idearc Inc. at a half-weight as opposed to a full weight as a result of the spin-off. Idearc operates yellow pages directories in the U.S. The economic recession has negatively affected spending on directories advertising with customer cancellations due to credit deterioration and lower customer renewal rates resulting in declining cash flows thereby reducing Idearc’s ability to support its current level of debt.
The impact of the Idearc credit event on ROC Pref II Corp. and Connor, Clark & Lunn ROC Pref Corp. will be known when the recovery rate is determined within the next several weeks. The recovery rate for ROC Pref III Corp. is fixed at 40%. As a result, the Idearc credit event is expected to reduce the number of additional defaults that ROC Pref III Corp. can sustain before the payment of $25.00 per Preferred Share at maturity is adversely affected by approximately 0.5 to 2.6.
ROC Pref II Corp., ROC Pref III Corp. and Connor, Clark & Lunn ROC Pref Corp. are listed for trading on the Toronto Stock Exchange under the symbols RPA.PR.A, RPB.PR.B and RPQ.PR.A, respectively.
Additionally, RPQ.PR.A is restating its financials:
the Company has restated and refiled its interim financial statements and management report of fund performance for the six months ended December 31, 2008.
In November 2008, the Company announced the implementation of restructuring initiatives designed to increase the likelihood that the Company will be able to repay the $25.00 Preferred Share issue price on the redemption of the Preferred Shares on June 30, 2011. As part of these initiatives, the next three quarters’ coupons on the underlying credit linked note (“CLN”) were sold to The Bank of Nova Scotia (“BNS”) (the issuer of the CLN) in return for additional subordination so that the number of defaults the CLN can sustain before principal and interest payments are adversely affected was increased.
In March 2009, the Manager determined that the 2008 fourth quarter CLN coupon payment had mistakenly been made by BNS resulting in an overstatement of Credit Trust IV’s and the Company’s net asset value. At the same time, the Manager also revisited the assumptions used to calculate the deferred management fee. The net impact of the two adjustments was a decrease in net assets by $0.07 per Preferred Share as at December 31, 2008. The Company has been reimbursed for the excess amounts paid out on the redemption of Preferred Shares as a result of the higher Preferred Share value.
It never rains but it pours!
RPQ.PR.A was last mentioned on PrefBlog in connection with the downgrade of the credit linked note (or, at least, what I think is the credit linked note). All three issues were mentioned with respect to the Tribune Credit Event in December.
None of these issues are tracked by HIMIPref™.
[…] was last mentioned on PrefBlog when the company announced the Idearc credit event. RPA.PR.A is not tracked by […]