MFC.PR.M : Convert or Hold?

December 3rd, 2019

It will be recalled that MFC.PR.M will reset at 3.800% effective December 20, 2019.

MFC.PR.M is a FixedReset, 3.90%+236, that commenced trading 2014-8-15 after being announced 2014-8-11. Notice of extension was published 2019-11-8. It is tracked by HIMIPref™ and has been assigned to the FixedReset (Insurance non-NVCC) subindex, but will move shortly to the FixedReset (Discount) subindex as the imposition of NVCC rules for insurers can no longer be considered probable.

The most logical way to analyze the question of whether or not to convert is through the theory of Preferred Pairs, for which a calculator is available. Briefly, a Strong Pair is defined as a pair of securities that can be interconverted in the future (e.g. MFC.PR.M and the FloatingReset that will exist if enough holders convert). Since they will be interconvertible on this future date, it may be assumed that they will be priced identically on this date (if they aren’t then holders will simply convert en masse to the higher-priced issue). And since they will be priced identically on a given date in the future, any current difference in price must be offset by expectations of an equal and opposite value of dividends to be received in the interim. And since the dividend rate on one element of the pair is both fixed and known, the implied average rate of the other, floating rate, instrument can be determined. Finally, we say, we may compare these average rates and take a view regarding the actual future course of that rate relative to the implied rate, which will provide us with guidance on which element of the pair is likely to outperform the other until the next interconversion date, at which time the process will be repeated.

We can show the break-even rates for each FixedReset / FloatingReset Strong Pair graphically by plotting the implied average 3-month bill rate against the next Exchange Date (which is the date to which the average will be calculated).

pairs_fr_191202
Click for Big

The market appears to have lost its fleeting interest in floating rate product; the implied rates until the next interconversion are below the current 3-month bill rate as the averages for investment-grade and junk issues are at +0.89% and +1.20%, respectively. Whatever might be the result of the next few Bank of Canada overnight rate decisions, I suggest that it is unlikely that the average rate over the next five years will be lower than current – but if you disagree, of course, you may interpret the data any way you like.

Since credit quality of each element of the pair is equal to the other element, it should not make any difference whether the pair examined is investment-grade or junk, although we might expect greater variation of implied rates between junk issues on grounds of lower liquidity, and this is just what we see.

If we plug in the current bid price of the MFC.PR.M FixedReset, we may construct the following table showing consistent prices for its soon-may-be-issued FloatingReset counterpart given a variety of Implied Breakeven yields consistent with issues currently trading:

Estimate of FloatingReset MFC.PR.S (received in exchange for MFC.PR.M) Trading Price In Current Conditions
  Assumed FloatingReset
Price if Implied Bill
is equal to
FixedReset Bid Price Spread 1.50% 1.00% 0.50%
MFC.PR.M 16.87 248bp 16.93 16.44 15.95

Based on current market conditions, I suggest that the FloatingResets that will result from conversion are likely to trade below the price of their FixedReset counterparts, MFC.PR.M. Therefore, I recommend that holders of MFC.PR.M continue to hold the issue and not to convert. I will note that once the FloatingResets commence trading (if, in fact, they do) it may be a good trade to swap one issue for the other in the market once both elements of each pair are trading and you can – hopefully – do it with a reasonably good take-out in price, rather than doing it through the company on a 1:1 basis. But that, of course, will depend on the prices at that time and your forecast for the path of policy rates over the next five years. There are no guarantees – my recommendation is based on the assumption that current market conditions with respect to the pairs will continue until the FloatingResets commence trading and that the relative pricing of the two new pairs will reflect these conditions.

Those who wish to convert are advised that the deadline for notifying the company of such a desire is 5:00 p.m. (Toronto time) on December 4, 2019. Brokers and other intermediaries generally set their internal deadlines a day or two in advance of this date, so if you wish to convert there’s no time to waste! Note that brokers will, in general, try to execute the instruction on a ‘best efforts’ basis if received between the two deadlines, provided that the procrastinating shareholder grovels entertainingly enough.

FFH.PR.C To Reset At 4.709%

December 3rd, 2019

Fairfax Financial Holdings Limited has announced:

that it has determined the fixed dividend rate on its Cumulative 5-Year Rate Reset Preferred Shares, Series C (the “Series C Shares”) (TSX: FFH.PR.C) for the five years commencing January 1, 2020 and ending December 31, 2024. The fixed quarterly dividends on the Series C Shares during that period, if and when declared, will be paid at an annual rate of 4.709% (C$0.294313 per share per quarter).

Holders of Series C Shares have the right, at their option, exercisable not later than 5:00 p.m. (Toronto time) on December 16, 2019, to convert all or part of their Series C Shares, on a one-for-one basis, into Cumulative Floating Rate Preferred Shares, Series D (the “Series D Shares”) (TSX: FFH.PR.D), effective December 31, 2019. The quarterly floating rate dividends on the Series D Shares will be paid at an annual rate, calculated for each quarter, of 3.15% over the annual yield on three-month Government of Canada treasury bills. The actual quarterly dividend rate in respect of the December 31, 2019 to March 30, 2020 dividend period for the Series D Shares will be 1.19721% (4.80199% on an annualized basis) and the dividend for such dividend period, if and when declared, will be C$0.29930 per share, payable on March 30, 2020.

Holders of Series D Shares also have the right, at their option, exercisable not later than 5:00 p.m. (Toronto time) on December 16, 2019, to convert all or part of their Series D Shares, on a one-for-one basis, into Series C Shares, effective December 31, 2019. Holders of the Series D Shares who elect to convert their shares by the conversion deadline will receive Series C Shares effective December 31, 2019 and will be entitled to receive, if and when declared, the fixed-rate dividend as described above.

Holders of Series C Shares are not required to elect to convert all or any part of their Series C Shares into Series D Shares and holders of Series D Shares are not required to elect to convert all or any part of their Series D Shares into Series C Shares. Holders of the Series C Shares who do not elect to convert their shares by the conversion deadline will retain their Series C Shares and will receive the fixed-rate dividend as described above (subject to the automatic conversion features described below). Holders of the Series D Shares who do not elect to convert their shares by the conversion deadline will retain their Series D Shares and will receive the floating-rate dividend as described above (subject to the automatic conversion features described below).

As provided in the share conditions of the Series C Shares and the Series D Shares: (i) if Fairfax determines that there would be fewer than 1,000,000 Series C Shares outstanding after December 31, 2019, all remaining Series C Shares will be automatically converted into Series D Shares on a one-for-one basis effective December 31, 2019 and Fairfax will cause the return of all Series C Shares tendered for conversion into Series D Shares; and (ii) if Fairfax determines that there would be fewer than 1,000,000 Series D Shares outstanding after December 31, 2019, all remaining Series D Shares will be automatically converted into Series C Shares on a one-for-one basis effective December 31, 2019 and Fairfax will cause the return of all Series D Shares tendered for conversion into Series C Shares.

There are currently 6,016,384 Series C Shares and 3,983,616 Series D Shares outstanding. The Series C Shares and the Series D Shares are listed on the Toronto Stock Exchange under the trading symbols “FFH.PR.C” and “FFH.PR.D”, respectively.

Fairfax also announces that it has declared the following quarterly dividends per share on its preferred shares:

Series of Preferred Shares Dividend (C$) Payment Date Record Date
Series C 0.286125 December 31, 2019 December 13, 2019
Series D 0.30171 December 30, 2019

FFH.PR.C was issued as a cumulative FixedReset issue, 5.75%+315 that commenced trading 2009-10-5 after being announced 2009-9-29. It reset to 4.578% in 2014. I recommended in favour of conversion to FloatingResets. The conversion rate was about 40%.

FFH.PR.D resulted from 40% conversion from FFH.PR.C in 2014 and commenced trading 2014-12-31.

The most logical way to analyze the question of whether or not to convert is through the theory of Preferred Pairs, for which a calculator is available. Briefly, a Strong Pair is defined as a pair of securities that can be interconverted in the future (e.g., FFH.PR.C and the FloatingReset FFH.PR.D that will exist if enough holders convert). Since they will be interconvertible on this future date, it may be assumed that they will be priced identically on this date (if they aren’t then holders will simply convert en masse to the higher-priced issue). And since they will be priced identically on a given date in the future, any current difference in price must be offset by expectations of an equal and opposite value of dividends to be received in the interim. And since the dividend rate on one element of the pair is both fixed and known, the implied average rate of the other, floating rate, instrument can be determined. Finally, we say, we may compare these average rates and take a view regarding the actual future course of that rate relative to the implied rate, which will provide us with guidance on which element of the pair is likely to outperform the other until the next interconversion date, at which time the process will be repeated.

We can show the break-even rates for each FixedReset / FloatingReset Strong Pair graphically by plotting the implied average 3-month bill rate against the next Exchange Date (which is the date to which the average will be calculated). Inspection of the graph and the overall average break-even rates for extant pairs will provide a guide for estimating the break-even rate for the pair now under consideration assuming, of course, that enough conversions occur so that the pair is in fact created.

pairs_fr_191202“>
Click for Big

The market has little enthusiasm for floating rate product; the implied rates until the next interconversion are generally well below the current 3-month bill rate as the averages for investment-grade and junk issues are at +0.89% and +1.20%, respectively. Whatever might be the result of the next few Bank of Canada overnight rate decisions, I suggest that it is unlikely that the average rate over the next five years will be lower than current – but if you disagree, of course, you may interpret the data any way you like.

Since credit quality of each element of the pair is equal to the other element, it should not make any difference whether the pair examined is investment-grade or junk, although we might expect greater variation of implied rates between junk issues on grounds of lower liquidity, and this is just what we see.

If we plug in the current bid price of the FFH.PR.C FixedReset, we may construct the following table showing consistent prices for its soon-may-be-issued FloatingReset counterpart given a variety of Implied Breakeven yields consistent with issues currently trading:

Estimate of FloatingReset FFH.PR.D (received in exchange for FFH.PR.C) Trading Price In Current Conditions
  Assumed FloatingReset
Price if Implied Bill
is equal to
FixedReset Bid Price Spread 1.50% 1.00% 0.50%
FFH.PR.C 17.70 315bp 17.64 17.17 16.69

Before I get eviscerated in the comments, please note that I am well aware that FFH.PR.D is trading and is quoted with a bid of 17.60. Who cares? At the moment, both issues are cum-dividend and are interconvertible effective December 31 and are therefore differ from being the exactly same thing from an investment perspective only by the difference in one dividend payment, less than two cents. We are interested in predicting what might happen after the potential for conversion has passed.

Based on current market conditions, I suggest that the FloatingResets FFH.PR.D that will result from conversion are likely to trade below the price of their FixedReset counterparts, FFH.PR.C. Therefore, it seems likely that I will recommend that holders of FFH.PR.C continue to hold the issue and not to convert, while holders of FFH.PR.D should convert to FFH.PR.C, but I will wait until it’s closer to the December 16 notification deadline before making a final pronouncement. I will note that once the conversion period has passed it may be a good trade to swap one issue for the other in the market once both elements of each pair are trading and you can – hopefully – do it with a reasonably good take-out in price, rather than doing it through the company on a 1:1 basis. But that, of course, will depend on the prices at that time and your forecast for the path of policy rates over the next five years. There are no guarantees – my recommendation is based on the assumption that current market conditions with respect to the pairs will continue until the FloatingResets commence trading and that the relative pricing of the two new pairs will reflect these conditions.

AZP.PR.B To Reset At 5.67%

December 3rd, 2019

This notice has been cancelled and corrected. See AZP.PR.B Resets Reset To 5.739%, and for background see Anomalies In Resets for 2019-12-31.

Atlantic Power Corporation and Atlantic Power Preferred Equity Ltd. have announced:

The reset rate for the Series 2 Shares, using a fixed dividend rate (the “Fixed Dividend Rate”), was calculated on November 29, 2019 to be 5.67%, representing the sum of the Canadian Government five-year bond yield of 1.49% plus 4.18%. Such Fixed Dividend Rate will commence with the March 31, 2020 dividend payment to the holders of the Series 2 Shares and continue through the December 31, 2024 dividend payment to the holders of the Series 2 Shares, at which time such Fixed Dividend Rate will again be reset.

The dividend rate for the Cumulative Floating Rate Preferred Shares, Series 3 (the “Series 3 Shares”), using a floating dividend rate (the “Floating Dividend Rate”), was calculated on November 29, 2019 to be 5.83%, representing the sum of the Canadian Government 90-day Treasury Bill yield (using the three-month average result of 1.65%) plus 4.18%. Such Floating Dividend Rate will be effective with the March 31, 2020 dividend payment to the holders of the Series 3 Shares. The Floating Dividend Rate for Series 3 Shares will be reset each quarter.

On December 31, 2019 and again on December 31 of every fifth year thereafter, the holders of Series 2 Shares have the right to convert their Series 2 Shares, on a one-for-one basis, into Series 3 Shares and the holders of Series 3 Shares have the right to convert their Series 3 Shares, on a one-for-one basis, into Series 2 Shares.

Holders of Series 2 Shares or Series 3 Shares who wish to convert such securities into Series 3 Shares or Series 2 Shares, respectively, should contact the financial institution, broker or other intermediary through which they hold the Series 2 Shares or Series 3 Shares to exercise this conversion privilege. Notice of the exercise of the conversion privilege (an “Election Notice”) must be received by Preferred Equity not earlier than December 1, 2019 and not later than 5:00 p.m. (Toronto time) on December 16, 2019.

Automatic Conversion and Restrictions on Conversion

Series 2 Shares

If, after giving effect to all Election Notices, there would remain outstanding less than 1 million Series 2 Shares, then all remaining outstanding Series 2 Shares will automatically convert into Series 3 Shares, on a one-for-one basis on December 31, 2019. Holders of the Series 2 Shares will not be permitted to convert their Series 2 Shares into Series 3 Shares if, after giving effect to all Election Notices, there would be outstanding less than 1 million Series 3 Shares.

Series 3 Shares

If, after giving effect to all Election Notices, there would remain outstanding less than 1 million Series 3 Shares, then all remaining outstanding Series 3 Shares will automatically convert into Series 2 Shares, on a one-for-one basis on December 31, 2019. Holders of the Series 3 Shares will not be permitted to convert their Series 3 Shares into Series 2 Shares if, after giving effect to all Election Notices, there would be outstanding less than 1 million Series 2 Shares.

AZP.PR.B used to be CZP.PR.B, which used to be EPP.PR.B, and throughout these changes was a FixedReset, 7.00%+418, which commenced trading 2009-11-2 after being announced 2009-10-13. You can’t tell your players without a programme! Notice of extension was provided in November, 2014, and it reset to 5.57% effective 2014-12-31. I recommended in favour of conversion and the conversion rate was 42%. The company announced the extension to 2024 on 2019-11-14.

AZP.PR.C resulted from the partial conversion of AZP.PR.B and commenced trading 2014-12-31.

The most logical way to analyze the question of whether or not to convert is through the theory of Preferred Pairs, for which a calculator is available. Briefly, a Strong Pair is defined as a pair of securities that can be interconverted in the future (e.g., AZP.PR.B and the FloatingReset that will exist if enough holders convert). Since they will be interconvertible on this future date, it may be assumed that they will be priced identically on this date (if they aren’t then holders will simply convert en masse to the higher-priced issue). And since they will be priced identically on a given date in the future, any current difference in price must be offset by expectations of an equal and opposite value of dividends to be received in the interim. And since the dividend rate on one element of the pair is both fixed and known, the implied average rate of the other, floating rate, instrument can be determined. Finally, we say, we may compare these average rates and take a view regarding the actual future course of that rate relative to the implied rate, which will provide us with guidance on which element of the pair is likely to outperform the other until the next interconversion date, at which time the process will be repeated.

We can show the break-even rates for each FixedReset / FloatingReset Strong Pair graphically by plotting the implied average 3-month bill rate against the next Exchange Date (which is the date to which the average will be calculated). Inspection of the graph and the overall average break-even rates for extant pairs will provide a guide for estimating the break-even rate for the pair now under consideration assuming, of course, that enough conversions occur so that the pair is in fact created.

pairs_fr_191202“>
Click for Big

The market has little enthusiasm for floating rate product; the implied rates until the next interconversion are generally well below the current 3-month bill rate as the averages for investment-grade and junk issues are at +0.89% and +1.20%, respectively. Whatever might be the result of the next few Bank of Canada overnight rate decisions, I suggest that it is unlikely that the average rate over the next five years will be lower than current – but if you disagree, of course, you may interpret the data any way you like.

Since credit quality of each element of the pair is equal to the other element, it should not make any difference whether the pair examined is investment-grade or junk, although we might expect greater variation of implied rates between junk issues on grounds of lower liquidity, and this is just what we see.

If we plug in the current bid price of the AZP.PR.B FixedReset, we may construct the following table showing consistent prices for its soon-may-be-issued FloatingReset counterpart given a variety of Implied Breakeven yields consistent with issues currently trading:

Estimate of FloatingReset AZP.PR.C (received in exchange for AZP.PR.C) Trading Price In Current Conditions
  Assumed FloatingReset
Price if Implied Bill
is equal to
FixedReset Bid Price Spread 1.50% 1.00% 0.50%
AZP.PR.B 18.26 418bp 18.27 17.81 17.36

Before I get eviscerated in the comments, please note that I am well aware that AZP.PR.C is trading and is quoted with a bid of 18.51. Who cares? At the moment, both issues are cum-dividend and are interconvertible effective December 31 and are therefore differ from being the exactly same thing from an investment perspective only by the difference in one dividend payment, about two cents. We are interested in predicting what might happen after the potential for conversion has passed.

Based on current market conditions, I suggest that the FloatingResets AZP.PR.C that will result from conversion are likely to trade below the price of their FixedReset counterparts, AZP.PR.B. Therefore, it seems likely that I will recommend that holders of AZP.PR.B continue to hold the issue and not to convert, while holders of AZP.PR.C should convert to AZP.PR.B, but I will wait until it’s closer to the December 16 notification deadline before making a final pronouncement. I will note that once the conversion period has passed it may be a good trade to swap one issue for the other in the market once both elements of each pair are trading and you can – hopefully – do it with a reasonably good take-out in price, rather than doing it through the company on a 1:1 basis. But that, of course, will depend on the prices at that time and your forecast for the path of policy rates over the next five years. There are no guarantees – my recommendation is based on the assumption that current market conditions with respect to the pairs will continue until the FloatingResets commence trading and that the relative pricing of the two new pairs will reflect these conditions.

TRP.PR.A To Reset At 3.479%

December 3rd, 2019

TC Energy Corporation has announced:

that it has notified the registered shareholders of the applicable dividend rates for its Cumulative Redeemable First Preferred Shares, Series 1 (Series 1 Shares) and its Cumulative Redeemable First Preferred Shares, Series 2 (Series 2 Shares).

As previously announced in the Company’s news release dated November 21, 2019, holders of the Series 1 Shares have the right on December 31, 2019 to convert, on a one-for-one basis, any or all of their Series 1 Shares into Series 2 Shares and receive a floating rate quarterly dividend, or retain any or all of their Series 1 Shares and receive a new fixed rate quarterly dividend.

Holders of the Series 2 Shares have the right on December 31, 2019 to convert, on a one-for-one basis, any or all of their Series 2 Shares into Series 1 Shares and receive a fixed rate quarterly dividend, or retain any or all of their Series 2 Shares and receive a floating rate quarterly dividend.

Should a holder of Series 1 Shares choose to retain their shares, such shareholders will receive the new annual fixed dividend rate applicable to Series 1 Shares of 3.479% for the five-year period commencing December 31, 2019 to, but excluding, December 31, 2024. Should a holder of Series 1 Shares choose to convert their shares to Series 2 Shares, holders of Series 2 Shares will receive the floating quarterly dividend rate applicable to the Series 2 Shares of 3.572% for the three-month period commencing December 31, 2019 to, but excluding, March 30, 2020. The floating dividend rate will be reset every quarter.

Should a holder of Series 2 Shares choose to retain their shares, such shareholders will receive the floating quarterly dividend rate applicable to Series 2 Shares of 3.572% for the three-month period commencing December 31, 2019 to, but excluding, March 30, 2020. The floating dividend rate will be reset every quarter. Should a holder of Series 2 Shares choose to convert their shares to Series 1 Shares, holders of Series 1 Shares will receive the new fixed quarterly dividend rate applicable to the Series 1 Shares of 3.479% for the five-year period commencing December 31, 2019 to, but excluding, December 31, 2024.

Beneficial owners of Series 1 or Series 2 Shares who do not provide notice or communicate with their broker or other nominee by 5 p.m. (EST) on December 16, 2019 will retain their respective Series 1 Shares or Series 2 Shares, as applicable, and receive the new dividend rate applicable to such shares, subject to the conditions stated above.

The foregoing conversions are subject to the conditions that: (i) if TC Energy determines that there would be less than one million Series 1 Shares outstanding after December 31, 2019, then all remaining Series 1 Shares will automatically be converted into Series 2 Shares on a one-for-one basis on December 31, 2019, and (ii) if TC Energy determines that there would be less than one million Series 2 Shares outstanding after December 31, 2019, then all of the remaining outstanding Series 2 Shares will automatically be converted into Series 1 Shares on a one-for-one basis on December 31, 2019. In either case, TC Energy will issue a news release to that effect no later than December 23, 2019.

Holders of Series 1 Shares and Series 2 Shares will have the opportunity to convert their shares again on December 31, 2024 and every five years thereafter as long as the shares remain outstanding. For more information on the terms of, and risks associated with an investment in the Series 1 Shares and the Series 2 Shares, please see the prospectus supplement dated September 22, 2009 which is available on sedar.com or on our website.

TRP.PR.A commenced trading 2009-9-30 after being announced 2009-9-22. It commenced life as a FixedReset, 4.60%+192, that reset to 3.266% effective 2014-12-31. Assiduous Readers may recall that I have blamed the 2014 reset of TRP.PR.A for what we might now call ‘the first half’ of the current bear market. I recommended conversion to TRP.PR.F in 2014 and there was a conversion rate of about 62%. The company announced the extension to 2024 on 2019-11-21.

The most logical way to analyze the question of whether or not to convert is through the theory of Preferred Pairs, for which a calculator is available. Briefly, a Strong Pair is defined as a pair of securities that can be interconverted in the future (e.g., TRP.PR.A and the FloatingReset that will exist if enough holders convert). Since they will be interconvertible on this future date, it may be assumed that they will be priced identically on this date (if they aren’t then holders will simply convert en masse to the higher-priced issue). And since they will be priced identically on a given date in the future, any current difference in price must be offset by expectations of an equal and opposite value of dividends to be received in the interim. And since the dividend rate on one element of the pair is both fixed and known, the implied average rate of the other, floating rate, instrument can be determined. Finally, we say, we may compare these average rates and take a view regarding the actual future course of that rate relative to the implied rate, which will provide us with guidance on which element of the pair is likely to outperform the other until the next interconversion date, at which time the process will be repeated.

We can show the break-even rates for each FixedReset / FloatingReset Strong Pair graphically by plotting the implied average 3-month bill rate against the next Exchange Date (which is the date to which the average will be calculated). Inspection of the graph and the overall average break-even rates for extant pairs will provide a guide for estimating the break-even rate for the pair now under consideration assuming, of course, that enough conversions occur so that the pair is in fact created.

pairs_fr_191202“>
Click for Big

The market has little enthusiasm for floating rate product; the implied rates until the next interconversion are generally well below the current 3-month bill rate as the averages for investment-grade and junk issues are at +0.89% and +1.20%, respectively. Whatever might be the result of the next few Bank of Canada overnight rate decisions, I suggest that it is unlikely that the average rate over the next five years will be lower than current – but if you disagree, of course, you may interpret the data any way you like.

Since credit quality of each element of the pair is equal to the other element, it should not make any difference whether the pair examined is investment-grade or junk, although we might expect greater variation of implied rates between junk issues on grounds of lower liquidity, and this is just what we see.

If we plug in the current bid price of the TRP.PR.A FixedReset, we may construct the following table showing consistent prices for its soon-may-be-issued FloatingReset counterpart given a variety of Implied Breakeven yields consistent with issues currently trading:

Estimate of FloatingReset TRP.PR.F (received in exchange for TRP.PR.A) Trading Price In Current Conditions
  Assumed FloatingReset
Price if Implied Bill
is equal to
FixedReset Bid Price Spread 1.50% 1.00% 0.50%
TRP.PR.A 13.82 192bp 13.76 13.28 12.80

Before I get eviscerated in the comments, please note that I am well aware that TRP.PR.F is trading and is quoted with a bid of 13.84. Who cares? At the moment, both issues are ex-dividend and are interconvertible effective December 31 and are therefore exactly the same thing from an investment perspective. We are interested in predicting what might happen after the potential for conversion has passed.

Based on current market conditions, I suggest that the FloatingResets TRP.PR.F that will result from conversion are likely to trade below the price of their FixedReset counterparts, TRP.PR.A. Therefore, it seems likely that I will recommend that holders of TRP.PR.A continue to hold the issue and not to convert, while holders of TRP.PR.F should convert to TRP.PR.A, but I will wait until it’s closer to the December 16 notification deadline before making a final pronouncement. I will note that once the conversion period has passed it may be a good trade to swap one issue for the other in the market once both elements of each pair are trading and you can – hopefully – do it with a reasonably good take-out in price, rather than doing it through the company on a 1:1 basis. But that, of course, will depend on the prices at that time and your forecast for the path of policy rates over the next five years. There are no guarantees – my recommendation is based on the assumption that current market conditions with respect to the pairs will continue until the FloatingResets commence trading and that the relative pricing of the two new pairs will reflect these conditions.

BPO.PR.A To Reset At 4.709%

December 3rd, 2019

Brookfield Office Properties Inc., a subsidiary of Brookfield Property Partners L.P. has announced:

the reset dividend rate on its Class AAA Preference Shares, Series AA (“Series AA Shares”) (TSX: BPO.PR.A)

Series AA Shares

If declared, the fixed quarterly dividends on the Series AA Shares for the five years commencing January 1, 2020 and ending December 31, 2024 will be paid at an annual rate of 4.709% ($0.294313 per share per quarter).

Holders of Series AA Shares have the right, at their option, exercisable not later than 5:00 p.m. (Toronto time) on December 16, 2019, to convert all or part of their Series AA Shares, on a one-for-one basis, into Class AAA Preference Shares, Series BB (the “Series BB Shares”), effective December 31, 2019.

The quarterly floating rate dividends on the Series BB Shares have an annual rate, calculated for each quarter, of 3.15% over the annual yield on three-month Government of Canada treasury bills. The actual quarterly dividend rate for the January 1, 2020 to March 31, 2020 dividend period for the Series BB Shares will be 1.196710% (4.80% on an annualized basis) and the dividend, if declared, for such dividend period will be $0.299178 per share, payable on March 31, 2020.

Holders of Series AA Shares are not required to elect to convert all or any part of their Series AA Shares into Series BB Shares.

As provided in the share conditions of the Series AA Shares, (i) if Brookfield determines that there would be fewer than 1,000,000 Series AA Shares outstanding after December 31, 2019, all remaining Series AA Shares will be automatically converted into Series BB Shares on a one-for-one basis effective December 31, 2019; and (ii) if Brookfield determines that there would be fewer than 1,000,000 Series BB Shares outstanding after December 31, 2019, no Series AA Shares will be permitted to be converted into Series BB Shares. There are currently 12,000,000 Series AA Shares outstanding.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series BB Shares effective upon conversion. Listing of the Series BB Shares is subject to Brookfield fulfilling all the listing requirements of the TSX and, upon approval, the Series BB Shares will be listed on the TSX under the trading symbol “BPO.PR.B”.

BPO.PR.A is a FixedReset, 4.75%+315, that commenced trading 2014-10-23 after being announced 2014-10-7. The issue is tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

The most logical way to analyze the question of whether or not to convert is through the theory of Preferred Pairs, for which a calculator is available. Briefly, a Strong Pair is defined as a pair of securities that can be interconverted in the future (e.g., BPO.PR.A and the FloatingReset that will exist if enough holders convert). Since they will be interconvertible on this future date, it may be assumed that they will be priced identically on this date (if they aren’t then holders will simply convert en masse to the higher-priced issue). And since they will be priced identically on a given date in the future, any current difference in price must be offset by expectations of an equal and opposite value of dividends to be received in the interim. And since the dividend rate on one element of the pair is both fixed and known, the implied average rate of the other, floating rate, instrument can be determined. Finally, we say, we may compare these average rates and take a view regarding the actual future course of that rate relative to the implied rate, which will provide us with guidance on which element of the pair is likely to outperform the other until the next interconversion date, at which time the process will be repeated.

We can show the break-even rates for each FixedReset / FloatingReset Strong Pair graphically by plotting the implied average 3-month bill rate against the next Exchange Date (which is the date to which the average will be calculated). Inspection of the graph and the overall average break-even rates for extant pairs will provide a guide for estimating the break-even rate for the pair now under consideration assuming, of course, that enough conversions occur so that the pair is in fact created.

pairs_fr_191202“>
Click for Big

The market has little enthusiasm for floating rate product; the implied rates until the next interconversion are generally well below the current 3-month bill rate as the averages for investment-grade and junk issues are at +0.89% and +1.20%, respectively. Whatever might be the result of the next few Bank of Canada overnight rate decisions, I suggest that it is unlikely that the average rate over the next five years will be lower than current – but if you disagree, of course, you may interpret the data any way you like.

Since credit quality of each element of the pair is equal to the other element, it should not make any difference whether the pair examined is investment-grade or junk, although we might expect greater variation of implied rates between junk issues on grounds of lower liquidity, and this is just what we see.

If we plug in the current bid price of the BPO.PR.A FixedReset, we may construct the following table showing consistent prices for its soon-may-be-issued FloatingReset counterpart given a variety of Implied Breakeven yields consistent with issues currently trading:

Estimate of FloatingReset (received in exchange for BPO.PR.A) Trading Price In Current Conditions
  Assumed FloatingReset
Price if Implied Bill
is equal to
FixedReset Bid Price Spread 1.50% 1.00% 0.50%
BPO.PR.A 17.81 315bp 17.75 17.28 16.80

Based on current market conditions, I suggest that the FloatingResets that will result from conversion are likely to trade below the price of their FixedReset counterparts, BPO.PR.A. Therefore, it seems likely that I will recommend that holders of BPO.PR.A continue to hold the issue and not to convert, but I will wait until it’s closer to the December 16 notification deadline before making a final pronouncement. I will note that once the FloatingResets commence trading (if, in fact, they do) it may be a good trade to swap one issue for the other in the market once both elements of each pair are trading and you can – hopefully – do it with a reasonably good take-out in price, rather than doing it through the company on a 1:1 basis. But that, of course, will depend on the prices at that time and your forecast for the path of policy rates over the next five years. There are no guarantees – my recommendation is based on the assumption that current market conditions with respect to the pairs will continue until the FloatingResets commence trading and that the relative pricing of the two new pairs will reflect these conditions.

HSE.PR.C To Reset At 4.636%

December 2nd, 2019

Husky Energy has announced:

that the Company does not intend to exercise its right to redeem its Cumulative Redeemable Preferred Shares, Series 3 (Series 3 Shares) on December 31, 2019. As a result, subject to certain conditions, the holders of Series 3 Shares have the right to choose one of the following options with regard to their shares:

retain any or all of their Series 3 Shares and continue to receive an annual fixed-rate dividend paid quarterly; or

convert, on a one-for-one basis, any or all of their Series 3 Shares into Cumulative Redeemable Preferred Shares, Series 4 (Series 4 Shares) of Husky and receive a floating rate quarterly dividend.
Conversion to Series 4 Shares is subject to the conditions that: (i) if Husky determines that there would be less than one million Series 3 Shares outstanding after December 31, 2019, then all remaining Series 3 Shares will automatically be converted to Series 4 Shares on a one-for-one basis on December 31, 2019, and (ii) if Husky determines that there would be less than one million Series 4 Shares outstanding after December 31, 2019, no Series 3 Shares will be converted into Series 4 Shares. In either case, Husky will issue a news release to that effect no later than December 24, 2019.

Holders of Series 3 Shares who choose to retain any or all of their shares will receive the new fixed-rate quarterly dividend applicable to the Series 3 Shares for the five-year period commencing December 31, 2019, to, but excluding, December 31, 2024 of 4.636%, being equal to the sum of the Government of Canada five-year bond yield of 1.506% plus 3.13% in accordance with the terms of the Series 3 Shares, subject to the conditions described above.

Holders of Series 3 Shares who choose to convert their shares to Series 4 Shares will receive a new floating-rate quarterly dividend applicable to the Series 4 Shares. The dividend rate applicable to the Series 4 Shares for the three-month period commencing December 31, 2019 to, but excluding, March 31, 2020 will be 4.782%, being equal to the annual rate for the most recent auction of 90-day Government of Canada Treasury Bills of 1.652% plus 3.13%, in accordance with the terms of the Series 4 Shares (the Floating Quarterly Dividend Rate), subject to the conditions described above. The Floating Quarterly Dividend Rate will be reset every quarter.

Beneficial owners of Series 3 Shares who wish to exercise the right of conversion should communicate as soon as possible with their brokers or other nominees in order to meet the deadline for registered holders to exercise such right, which is 5 p.m. ET on December 16, 2019. It is recommended this communication be had well in advance of the deadline in order to provide the brokers or other intermediaries with time to complete the necessary steps. Holders of Series 3 Shares who do not exercise the right of conversion by this deadline will continue to hold Series 3 Shares with the new annual fixed-rate dividend, subject to the conditions described above.

Holders of the Series 3 Shares and the Series 4 Shares will have the opportunity to convert their shares again on December 31, 2024 and every five years thereafter as long as the shares remain outstanding.

For more information on the terms of, and risks associated with, an investment in the Series 3 Shares and the Series 4 Shares, please see the Company’s prospectus supplement dated December 2, 2014 on www.sedar.com

HSE.PR.C is a FixedReset, 4.50%+313, that commenced trading 2014-12-9 after being announced 2014-12-1. The issue is tracked by HIMIPref™ and is been assigned to the FixedResets-Discount subindex.

The most logical way to analyze the question of whether or not to convert is through the theory of Preferred Pairs, for which a calculator is available. Briefly, a Strong Pair is defined as a pair of securities that can be interconverted in the future (e.g., HSE.PR.C and the FloatingReset that will exist if enough holders convert). Since they will be interconvertible on this future date, it may be assumed that they will be priced identically on this date (if they aren’t then holders will simply convert en masse to the higher-priced issue). And since they will be priced identically on a given date in the future, any current difference in price must be offset by expectations of an equal and opposite value of dividends to be received in the interim. And since the dividend rate on one element of the pair is both fixed and known, the implied average rate of the other, floating rate, instrument can be determined. Finally, we say, we may compare these average rates and take a view regarding the actual future course of that rate relative to the implied rate, which will provide us with guidance on which element of the pair is likely to outperform the other until the next interconversion date, at which time the process will be repeated.

We can show the break-even rates for each FixedReset / FloatingReset Strong Pair graphically by plotting the implied average 3-month bill rate against the next Exchange Date (which is the date to which the average will be calculated). Inspection of the graph and the overall average break-even rates for extant pairs will provide a guide for estimating the break-even rate for the pair now under consideration assuming, of course, that enough conversions occur so that the pair is in fact created.

pairs_fr_191202“>
Click for Big

The market has little enthusiasm for floating rate product; the implied rates until the next interconversion are generally well below the current 3-month bill rate as the averages for investment-grade and junk issues are at +0.89% and +1.20%, respectively. Whatever might be the result of the next few Bank of Canada overnight rate decisions, I suggest that it is unlikely that the average rate over the next five years will be lower than current – but if you disagree, of course, you may interpret the data any way you like.

Since credit quality of each element of the pair is equal to the other element, it should not make any difference whether the pair examined is investment-grade or junk, although we might expect greater variation of implied rates between junk issues on grounds of lower liquidity, and this is just what we see.

If we plug in the current bid price of the HSE.PR.C FixedReset, we may construct the following table showing consistent prices for its soon-may-be-issued FloatingReset counterpart given a variety of Implied Breakeven yields consistent with issues currently trading:

Estimate of FloatingReset (received in exchange for HSE.PR.C) Trading Price In Current Conditions
  Assumed FloatingReset
Price if Implied Bill
is equal to
FixedReset Bid Price Spread 1.50% 1.00% 0.50%
HSE.PR.C 16.45 313bp 16.44 15.98 15.51

Based on current market conditions, I suggest that the FloatingResets that will result from conversion are likely to trade below the price of their FixedReset counterparts, HSE.PR.C. Therefore, it seems likely that I will recommend that holders of HSE.PR.C continue to hold the issue and not to convert, but I will wait until it’s closer to the December 16 notification deadline before making a final pronouncement. I will note that once the FloatingResets commence trading (if, in fact, they do) it may be a good trade to swap one issue for the other in the market once both elements of each pair are trading and you can – hopefully – do it with a reasonably good take-out in price, rather than doing it through the company on a 1:1 basis. But that, of course, will depend on the prices at that time and your forecast for the path of policy rates over the next five years. There are no guarantees – my recommendation is based on the assumption that current market conditions with respect to the pairs will continue until the FloatingResets commence trading and that the relative pricing of the two new pairs will reflect these conditions.

December 2, 2019

December 2nd, 2019
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 0.4001 % 1,974.1
FixedFloater 0.00 % 0.00 % 0 0.00 0 0.4001 % 3,622.4
Floater 6.12 % 6.22 % 45,813 13.47 4 0.4001 % 2,087.6
OpRet 0.00 % 0.00 % 0 0.00 0 0.0902 % 3,425.7
SplitShare 4.65 % 4.52 % 46,388 3.86 7 0.0902 % 4,091.0
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 0.0902 % 3,192.0
Perpetual-Premium 5.53 % -20.13 % 54,468 0.09 10 0.1290 % 3,049.2
Perpetual-Discount 5.28 % 5.34 % 67,749 14.86 25 0.1102 % 3,271.3
FixedReset Disc 5.63 % 5.71 % 185,126 14.30 66 -0.1452 % 2,093.0
Deemed-Retractible 5.17 % 5.27 % 64,942 14.98 27 0.1422 % 3,221.7
FloatingReset 6.27 % 6.47 % 110,686 13.30 2 0.6839 % 2,454.0
FixedReset Prem 5.11 % 3.63 % 156,587 1.56 20 0.1015 % 2,629.3
FixedReset Bank Non 1.96 % 4.16 % 61,139 2.09 3 0.0551 % 2,702.0
FixedReset Ins Non 5.51 % 5.75 % 118,978 14.26 22 -0.3219 % 2,126.0
Performance Highlights
Issue Index Change Notes
GWO.PR.N FixedReset Ins Non -1.60 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-12-02
Maturity Price : 13.00
Evaluated at bid price : 13.00
Bid-YTW : 5.40 %
MFC.PR.R FixedReset Ins Non -1.26 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-12-02
Maturity Price : 23.27
Evaluated at bid price : 24.39
Bid-YTW : 5.39 %
TD.PF.A FixedReset Disc -1.18 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-12-02
Maturity Price : 16.69
Evaluated at bid price : 16.69
Bid-YTW : 5.68 %
MFC.PR.J FixedReset Ins Non -1.07 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-12-02
Maturity Price : 18.55
Evaluated at bid price : 18.55
Bid-YTW : 5.77 %
BAM.PR.B Floater 1.08 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-12-02
Maturity Price : 11.25
Evaluated at bid price : 11.25
Bid-YTW : 6.26 %
BAM.PR.K Floater 1.43 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-12-02
Maturity Price : 11.31
Evaluated at bid price : 11.31
Bid-YTW : 6.22 %
TRP.PR.F FloatingReset 1.69 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-12-02
Maturity Price : 13.84
Evaluated at bid price : 13.84
Bid-YTW : 6.47 %
Volume Highlights
Issue Index Shares
Traded
Notes
BAM.PR.T FixedReset Disc 149,325 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-12-02
Maturity Price : 15.30
Evaluated at bid price : 15.30
Bid-YTW : 6.31 %
TD.PF.E FixedReset Disc 111,859 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-12-02
Maturity Price : 19.56
Evaluated at bid price : 19.56
Bid-YTW : 5.66 %
BMO.PR.D FixedReset Disc 91,882 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-12-02
Maturity Price : 21.05
Evaluated at bid price : 21.05
Bid-YTW : 5.58 %
CM.PR.R FixedReset Disc 84,959 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-12-02
Maturity Price : 21.25
Evaluated at bid price : 21.25
Bid-YTW : 5.76 %
TD.PF.L FixedReset Disc 76,108 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-12-02
Maturity Price : 22.75
Evaluated at bid price : 23.85
Bid-YTW : 5.14 %
TD.PF.J FixedReset Disc 75,050 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-12-02
Maturity Price : 19.45
Evaluated at bid price : 19.45
Bid-YTW : 5.64 %
There were 53 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
GWO.PR.P Deemed-Retractible Quote: 24.92 – 25.24
Spot Rate : 0.3200
Average : 0.2058

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-01-01
Maturity Price : 25.00
Evaluated at bid price : 24.92
Bid-YTW : 4.12 %

TD.PF.M FixedReset Disc Quote: 24.55 – 24.80
Spot Rate : 0.2500
Average : 0.1525

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-12-02
Maturity Price : 23.03
Evaluated at bid price : 24.55
Bid-YTW : 5.17 %

GWO.PR.L Deemed-Retractible Quote: 25.36 – 25.59
Spot Rate : 0.2300
Average : 0.1388

YTW SCENARIO
Maturity Type : Call
Maturity Date : 2020-01-01
Maturity Price : 25.00
Evaluated at bid price : 25.36
Bid-YTW : -16.50 %

CU.PR.G Perpetual-Discount Quote: 21.24 – 21.49
Spot Rate : 0.2500
Average : 0.1648

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-12-02
Maturity Price : 21.24
Evaluated at bid price : 21.24
Bid-YTW : 5.33 %

BAM.PR.C Floater Quote: 11.11 – 11.33
Spot Rate : 0.2200
Average : 0.1459

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-12-02
Maturity Price : 11.11
Evaluated at bid price : 11.11
Bid-YTW : 6.34 %

BAM.PR.K Floater Quote: 11.31 – 11.57
Spot Rate : 0.2600
Average : 0.1963

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-12-02
Maturity Price : 11.31
Evaluated at bid price : 11.31
Bid-YTW : 6.22 %

November 29, 2019

November 30th, 2019
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 -0.5306 % 1,966.2
FixedFloater 0.00 % 0.00 % 0 0.00 0 -0.5306 % 3,607.9
Floater 6.15 % 6.31 % 42,679 13.35 4 -0.5306 % 2,079.3
OpRet 0.00 % 0.00 % 0 0.00 0 -0.0901 % 3,422.6
SplitShare 4.66 % 4.51 % 47,920 3.87 7 -0.0901 % 4,087.4
Interest-Bearing 0.00 % 0.00 % 0 0.00 0 -0.0901 % 3,189.1
Perpetual-Premium 5.54 % -19.03 % 54,531 0.09 10 -0.0274 % 3,045.3
Perpetual-Discount 5.29 % 5.38 % 68,606 14.84 25 0.1293 % 3,267.7
FixedReset Disc 5.62 % 5.67 % 183,511 14.33 66 0.1113 % 2,096.1
Deemed-Retractible 5.15 % 5.28 % 65,390 14.78 27 0.1450 % 3,217.1
FloatingReset 6.34 % 6.59 % 111,922 13.13 2 -0.6081 % 2,437.3
FixedReset Prem 5.12 % 3.63 % 153,806 1.57 20 -0.0039 % 2,626.6
FixedReset Bank Non 1.96 % 4.13 % 61,885 2.10 3 -0.1100 % 2,700.5
FixedReset Ins Non 5.49 % 5.72 % 120,132 14.34 22 -0.1877 % 2,132.9
Performance Highlights
Issue Index Change Notes
IAF.PR.I FixedReset Ins Non -1.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 19.10
Evaluated at bid price : 19.10
Bid-YTW : 5.72 %
PWF.PR.P FixedReset Disc -1.80 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 12.57
Evaluated at bid price : 12.57
Bid-YTW : 6.15 %
SLF.PR.H FixedReset Ins Non -1.50 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 15.73
Evaluated at bid price : 15.73
Bid-YTW : 5.72 %
TRP.PR.B FixedReset Disc -1.46 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 11.06
Evaluated at bid price : 11.06
Bid-YTW : 6.29 %
SLF.PR.J FloatingReset -1.17 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 12.71
Evaluated at bid price : 12.71
Bid-YTW : 6.05 %
PWF.PR.A Floater -1.02 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 11.60
Evaluated at bid price : 11.60
Bid-YTW : 6.02 %
BAM.PF.A FixedReset Disc -1.01 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 19.70
Evaluated at bid price : 19.70
Bid-YTW : 5.90 %
HSE.PR.C FixedReset Disc 1.04 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 16.40
Evaluated at bid price : 16.40
Bid-YTW : 7.09 %
BAM.PF.J FixedReset Disc 1.05 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 23.39
Evaluated at bid price : 25.07
Bid-YTW : 4.71 %
PWF.PR.T FixedReset Disc 1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 17.86
Evaluated at bid price : 17.86
Bid-YTW : 5.61 %
TRP.PR.A FixedReset Disc 1.48 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 13.76
Evaluated at bid price : 13.76
Bid-YTW : 6.24 %
HSE.PR.G FixedReset Disc 1.77 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 17.35
Evaluated at bid price : 17.35
Bid-YTW : 7.25 %
HSE.PR.E FixedReset Disc 2.20 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 17.40
Evaluated at bid price : 17.40
Bid-YTW : 7.31 %
BAM.PR.X FixedReset Disc 2.95 % YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 13.25
Evaluated at bid price : 13.25
Bid-YTW : 6.18 %
Volume Highlights
Issue Index Shares
Traded
Notes
BMO.PR.E FixedReset Disc 115,285 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 19.50
Evaluated at bid price : 19.50
Bid-YTW : 5.61 %
CM.PR.T FixedReset Disc 94,382 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 22.68
Evaluated at bid price : 23.71
Bid-YTW : 5.19 %
TRP.PR.A FixedReset Disc 86,549 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 13.76
Evaluated at bid price : 13.76
Bid-YTW : 6.24 %
CM.PR.R FixedReset Disc 74,932 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 21.20
Evaluated at bid price : 21.20
Bid-YTW : 5.74 %
RY.PR.S FixedReset Disc 51,451 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 18.85
Evaluated at bid price : 18.85
Bid-YTW : 5.49 %
IFC.PR.G FixedReset Ins Non 47,526 YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 18.26
Evaluated at bid price : 18.26
Bid-YTW : 5.93 %
There were 33 other index-included issues trading in excess of 10,000 shares.
Wide Spread Highlights
Issue Index Quote Data and Yield Notes
SLF.PR.J FloatingReset Quote: 12.71 – 13.16
Spot Rate : 0.4500
Average : 0.3226

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 12.71
Evaluated at bid price : 12.71
Bid-YTW : 6.05 %

HSE.PR.C FixedReset Disc Quote: 16.40 – 16.83
Spot Rate : 0.4300
Average : 0.3109

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 16.40
Evaluated at bid price : 16.40
Bid-YTW : 7.09 %

BNS.PR.Z FixedReset Bank Non Quote: 24.17 – 24.50
Spot Rate : 0.3300
Average : 0.2157

YTW SCENARIO
Maturity Type : Hard Maturity
Maturity Date : 2022-01-31
Maturity Price : 25.00
Evaluated at bid price : 24.17
Bid-YTW : 4.13 %

BMO.PR.S FixedReset Disc Quote: 17.20 – 17.47
Spot Rate : 0.2700
Average : 0.1658

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 17.20
Evaluated at bid price : 17.20
Bid-YTW : 5.63 %

BAM.PF.E FixedReset Disc Quote: 16.45 – 16.82
Spot Rate : 0.3700
Average : 0.2679

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 16.45
Evaluated at bid price : 16.45
Bid-YTW : 6.31 %

NA.PR.E FixedReset Disc Quote: 18.26 – 18.58
Spot Rate : 0.3200
Average : 0.2314

YTW SCENARIO
Maturity Type : Limit Maturity
Maturity Date : 2049-11-29
Maturity Price : 18.26
Evaluated at bid price : 18.26
Bid-YTW : 5.80 %

AX : DBRS Says ‘Trend Negative’

November 29th, 2019

DBRS has announced that it:

changed the trends on Artis Real Estate Investment Trust’s (Artis or the Trust) Senior Unsecured Debentures and Preferred Trust Units to Negative from Stable and confirmed the ratings at BBB (low) and Pfd-3 (low), respectively. The Negative trends reflect increased debt and, therefore, leverage as Artis used fewer proceeds from property dispositions for debt reduction and more for unit buybacks than DBRS Morningstar expected based on the Trust’s strategic initiatives announced on November 1, 2018. In DBRS Morningstar’s view, Artis’s execution of its strategic initiatives to date has heavily favoured unitholders, which has resulted in elevated leverage (i.e., total debt-to-EBITDA of 10.0 times (x) and decreased EBITDA interest coverage of 2.63x in the last 12 months ended September 30, 2019). DBRS Morningstar anticipates that the Trust’s key financial risk metrics will likely remain near current levels in the near to medium term, despite Artis’s execution of its strategic initiatives, which is progressing ahead of schedule. The Trust’s current DBRS Morningstar-adjusted total debt of approximately $3.0 billion and DBRS Morningstar’s future expectations for key financial risk metrics contrast with DBRS Morningstar’s last review on December 21, 2018. At that time, DBRS Morningstar expected Artis’s key financial risk metrics to remain elevated, but stable with a total debt-to-EBITDA ratio of approximately 9.4x and EBITDA interest coverage of 2.8x through 2020 as Artis planned to use some proceeds from dispositions to pay down debt, such that total debt remained near September 30, 2018, levels of approximately $2.8 billion.

DBRS Morningstar will likely consider a rating downgrade within the next 12 months if Artis continues to sell assets in a credit-dilutive way (e.g., deploying more sales proceeds toward unit buybacks than DBRS Morningstar expected), such that the total debt-to-EBITDA ratio remains above 9.8x or EBITDA interest coverage remains below 2.70x, all else equal, or if DBRS Morningstar foresees elevated liquidity or refinancing risk in light of the current short debt maturity schedule (weighted-average term to debt maturity of 2.3 years at September 30, 2019). DBRS Morningstar may revise the trend on the ratings to Stable if Artis demonstrates more balanced treatment of debt and unitholders by reducing debt, such that DBRS Morningstar can comfortably expect improved key financial risk metrics compared with current expectations while further benefitting from improved diversification as Artis concludes its strategic initiatives.

Affected issues are AX.PR.A, AX.PR.E and AX.PR.I.

SJR.PR.A & SJR.PR.B : S&P Says ‘Outlook Positive’

November 29th, 2019

Standard and Poor’s has announced:

  • Growing wireless operations, improving wireline profitability, and noncore asset sales have enabled Calgary-based Shaw Communications Inc. to exit fiscal 2019 with S&P Global Ratings’ adjusted debt-to-EBITDA ratio of 2x.
  • We believe Shaw can sustain leverage below 2.5x (post IFRS-16) over the next two years even assuming wireless spectrum investments and higher cash dividend outflow.
  • As a result, S&P Global Ratings revised its outlook on Shaw to positive from stable. At the same time, S&P Global Ratings affirmed all of its ratings on Shaw, including its ‘BBB-‘ issuer credit and unsecured issue-level ratings.
  • The positive outlook reflects our view that a more balanced competitive environment in wireline combined with disciplined growth in wireless can help sustain Shaw’s improved financial profile over the near term despite higher competition in wireless and generally rising regulatory risks.


Growth in Shaw’s wireless subscriber base and improving profitability in wireline will support EBITDA growth and margins. In the past few years, Shaw has taken major steps to establish itself as a fourth national player in the Canadian wireless market. Concrete steps the company has taken to expand its wireless operations include: adding 266,000 net subscribers to expand its subscriber base to 1.7 million (about 10% market share of covered population), launching its Big Gig Unlimited and Absolute Zero Plans in the fourth quarter to compete against incumbents, expanding its network to cover 50% of Canadians (18.5 million people), deploying 700 MHz spectrum, and doubling its retail distribution network. A network quality closer to that of peers, a growing subscription base, and a significantly lower-priced offering should continue to support the company’s wireless growth.

We could raise the rating within the next 12 months if the company continues to profitably expand its wireless business and maintain stable wireline EBITDA such that EBITDA shows growth year-over-year and S&P Global Ratings’ adjusted EBITDA margins remain strong (over 40%), reflecting the success of Shaw’s various strategies and arguably benign regulatory environment. Also taking into consideration spectrum auctions and shareholder returns, we expect Shaw’s peak leverage to remain below 2.75x in the future.

We could stabilize the outlook if we view the competitive and regulatory risks to be detrimental to Shaw’s operations (either wireless or wireline) such that there is increasing risk that leverage will ultimately prove to be higher than 2.75x. We will also have lower tolerance if Shaw pursues aggressive shareholder returns (higher than our base-case scenario) at the expense of business growth or balance-sheet strength and this will likely be reflected by a lower tolerance if leverage metrics exceed 2.75x.

Affected issues are SJR.PR.A and SJR.PR.B.