Category: Issue Comments

Manulife Financial Corporation has announced:

that it has completed its offering of 19 million Non-cumulative Rate Reset Class 1 Shares Series 23 (the “Series 23 Preferred Shares”) at a price of $25 per share to raise gross proceeds of $475 million.

The offering was underwritten by a syndicate of investment dealers co-led by RBC Capital Markets, BMO Capital Markets and Scotiabank. The Series 23 Preferred Shares commence trading on the Toronto Stock Exchange today under the ticker symbol MFC.PR.R.

The Series 23 Preferred Shares were issued under a prospectus supplement dated November 15, 2016 to Manulife’s short form base shelf prospectus dated December 17, 2015.

MFC.PR.R is a FixedReset, 4.85%+383, announced November 14. The issue will be tracked by HIMIPref™ and has been assigned to the FixedReset subindex.

As this issue is from an insurer and there is no provision for conversion into common shares at the option of the issuer, I consider this to be subject to my Deemed Retraction policy; accordingly I have placed a maturity entry dated 2025-1-31 at par in the call schedule of this instrument for analytical purposes. Note that this approach is due to analysis and there is no contractual provision in the terms of issue for any such maturity.

The issue traded 989,738 shares today in a range of 24.68-90 before closing at 24.84-89, 5×74. Vital statistics are:

Implied Volatility analysis suggests the issue is rich relative to its peers – the theoretical price is 23.95.

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Manulife Financial Corporation has announced:

the applicable dividend rates for its Non-cumulative Rate Reset Class 1 Shares Series 5 (the “Series 5 Preferred Shares”) (TSX: MFC.PR.G) and Non-cumulative Floating Rate Class 1 Shares Series 6 (the “Series 6 Preferred Shares”).

With respect to any Series 5 Preferred Shares that remain outstanding after December 19, 2016, holders thereof will be entitled to receive fixed rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of Manulife and subject to the provisions of the Insurance Companies Act (Canada). The dividend rate for the five-year period commencing on December 20, 2016, and ending on December 19, 2021, will be 3.89100% per annum or $0.243188 per share per quarter, being equal to the sum of the five-year Government of Canada bond yield as at November 21, 2016, plus 2.90%, as determined in accordance with the terms of the Series 5 Preferred Shares.

With respect to any Series 6 Preferred Shares that may be issued on December 19, 2016 in connection with the conversion of the Series 5 Preferred Shares into the Series 6 Preferred Shares, holders thereof will be entitled to receive floating rate non-cumulative preferential cash dividends on a quarterly basis, calculated on the basis of actual number of days elapsed in each quarterly floating rate period divided by 365, as and when declared by the Board of Directors of Manulife and subject to the provisions of the Insurance Companies Act (Canada). The dividend rate for the three-month period commencing on December 20, 2016, and ending on March 19, 2017, will be 0.83885% (3.40200% on an annualized basis) or $0.209713 per share, being equal to the sum of the three-month Government of Canada Treasury bill yield as at November 21, 2016, plus 2.90%, as determined in accordance with the terms of the Series 6 Preferred Shares.

Beneficial owners of Series 5 Preferred Shares who wish to exercise their right of conversion should instruct their broker or other nominee to exercise such right before 5:00 p.m. (Toronto time) on December 5, 2016. The news release announcing such conversion right was issued on October 20, 2016 and can be viewed on SEDAR or Manulife’s website. Conversion inquiries should be directed to Manulife’s Registrar and Transfer Agent, CST Trust Company, at 1-800-387-0825.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 6 Preferred Shares effective upon conversion. Listing of the Series 6 Preferred Shares is subject to Manulife fulfilling all the listing requirements of the TSX and, upon approval, the Series 6 Preferred Shares will be listed on the TSX under the trading symbol “MFC.PR.Q”.

The prior notice of extension was reported on PrefBlog.

I will make a recommendation regarding whether to convert or hold MFC.PR.G at month-end.

DBRS has announced that it:

has today maintained its status of Under Review with Negative Implications on the BBB Issuer Rating and Senior Unsecured Notes rating and the Pfd-3 Preferred Share rating of Veresen Inc. (Veresen or the Company). The ratings were placed Under Review with Negative Implications on August 4, 2016, following the Company’s announcement that it will sell its power generation business, suspend its Premium Dividend and Dividend Reinvestment Plan (DRIP) from August 2016 and maintain its current dividend payout. Proceeds from the sale of the power business will be invested to develop Veresen’s midstream projects in the core natural gas and natural gas liquids infrastructure business.
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Overall, DBRS believes that the weakness in Veresen’s business risk profile will not be mitigated by any meaningful improvement in the Company’s financial risk profile and will likely result in lower ratings. DBRS recognizes that there are execution risks related to the sale of the power business, and any delays in the execution and change in market conditions could affect the Company’s financial risk profile. Consequently, DBRS has placed Veresen’s ratings Under Review with Negative Implications. DBRS expects any downgrade of the Company’s ratings to be limited to one notch. DBRS will further review the details relating to the sale of the power business as they become available and aims to resolve the Under Review with Negative Implications status after the sale transactions have closed. Veresen expects to enter into binding sale agreements in Q1 2017, with closing in the first half of 2017.

I previously reported the placement on Review-Negative in early August, 2016.

Affected issues are VSN.PR.A, VSN.PR.C and VSN.PR.E.

TransCanada Corporation has announced:

that it has completed its public offering of cumulative redeemable minimum rate reset first preferred shares, series 15 (the “Series 15 Preferred Shares”). TransCanada issued 40 million Series 15 Preferred Shares for aggregate gross proceeds of $1.0 billion through a syndicate of underwriters co-led by Scotiabank, BMO Capital Markets, CIBC Capital Markets, RBC Capital Markets and TD Securities Inc.

The net proceeds of the offering will be used for general corporate purposes and to reduce short term indebtedness of TransCanada and its affiliates, which short term indebtedness was used to fund TransCanada’s capital program and for general corporate purposes.

The Series 15 Preferred Shares will begin trading today on the TSX under the symbol TRP.PR.K.

TRP.PR.K is a FixedReset, 4.90%+385M490, announced 2016-11-14. It will be tracked by HIMIPref™ and has been assigned to the FixedResets subindex.

The issue traded a whopping 1,943,523 shares today in a range of 24.80-99 before closing at 24.80-81, 316×12. The volume only places it 38th on my all-time high-volume list; it’s well behind the 4.3-million odd shares of BMO.PR.B traded 2016-10-21. Vital statistics are:

Implied Volatility leads to a suspicion that this issue is overpriced in relation to its peers:

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Standard & Poor’s has announced:

• •We have revised our view of IGM’s importance to its ultimate parent, Power Corp. of Canada, to moderately strategic from nonstrategic.
• •We are upgrading IGM to ‘A+/A-1+’ from ‘A/A-1’ and raising all of our
  issue-level ratings by one notch.

• •The stable outlook reflects our expectation that IGM will maintain a strong market position in Canada while keeping stable-to-improving profitability and coverage ratios.

…
“The upgrade follows our reassessment of IGM as a moderately strategic subsidiary of Power Corp. of Canada compared with our previous assessment of nonstrategic under our group rating methodology,” said S&P Global Ratings credit analyst Brian Estiz. “We base our reassessment of the group credit profile on our belief that IGM is an important part of Power’s long-term strategy and is unlikely to be sold in the near term. We believe that Power would support the company to a limited extent if there was need. IGM represents about 20% of Power Financial Corp.’s earnings, which in turn represents about 85% of Power’s net earnings. We consider Power’s business risk profile excellent, largely because of the leading market positions of IGM and Great-West Life, which both have the No. 1 market position in Canada in their respective businesses and have reported stable earnings over the past few years.”

This follows the downgrade of December, 2014.

On November 17, Quadravest announced:

Financial 15 Split Corp. (the “Company”) is pleased to announce it has filed a preliminary short form prospectus in each of the provinces of Canada with respect to an offering of Preferred Shares and Class A Shares of the Company. The offering will be co-led by National Bank Financial Inc., CIBC, RBC Capital Markets, Scotia Capital Inc., and will also include BMO Capital Markets, GMP Securities L.P., Canaccord Genuity Corp., Raymond James, Desjardins Securities Inc., Mackie Research Capital Corporation and Manulife Securities Incorporated.

The Preferred Shares will be offered at a price of $10.00 per Preferred Share to yield 5.25% and the Class A Shares will be offered at a price of $8.75 per Class A Share to yield 17.24%.

The closing price on the TSX of each of the Preferred Shares and the Class A Shares on November 16, 2016 was $10.15 and $9.02, respectively.

Since inception of the Company, the aggregate dividends paid on the Preferred Shares have been $6.81 per share and the aggregate dividends paid on the Class A Shares have been $15.63 per share, for a combined total of $22.44. All distributions to date have been made in tax advantage eligible Canadian dividends or capital gains dividends.

The net proceeds of the offering will be used by the Company to invest in an actively managed, high quality portfolio consisting of 15 financial services companies made up of Canadian and U.S. issuers as follows:

Bank of Montreal	National Bank of Canada	Bank of America Corp.
The Bank of Nova Scotia	Manulife Financial Corporation	Citigroup Inc.
Canadian Imperial Bank of Commerce	Sun Life Financial Services of Canada Inc.	Goldman Sachs Group Inc.
Royal Bank of Canada	Great-West Lifeco Inc.	JP Morgan Chase & Co.
The Toronto-Dominion Bank	CI Financial Corp.	Wells Fargo & Co.

The Company’s investment objectives are:
Preferred Shares:
i. to provide holders of the Preferred Shares with fixed, cumulative preferential monthly cash dividends currently in the amount of 5.25% annually, to be set by the Board of Directors annually subject to a minimum of 5.25% until 2020; and
ii. on or about the termination date, currently December 1, 2020 (subject to further 5 year extensions thereafter), to pay the holders of the Preferred Shares $10.00 per Preferred Share.

Class A Shares:
i. to provide holders of the Class A Shares with regular monthly cash dividends in an amount to be determined by the Board of the Directors; and
ii. to permit holders to participate in all growth in the net asset value of the Company above $10 per Unit, by paying holders on or about the termination date of December 1, 2020 (subject to further 5 year extensions thereafter) such amounts as remain in the Company after paying $10 per Preferred Share.

The sales period of this overnight offering will end at 9:00 a.m. EST on November 18, 2016.

On November 18, Quadravest further announced:

Financial 15 Split Corp. (the “Company”) is pleased to announce it has completed the overnight marketing of up to 2,040,000 Preferred Shares and up to 2,040,000 Class A Shares of the Company. Total proceeds of the offering are expected to be approximately $38.3 million.

The offering is being co-led by National Bank Financial Inc., CIBC, RBC Capital Markets, Scotia Capital Inc., and also includes BMO Capital Markets, GMP Securities L.P., Canaccord Genuity Corp., Raymond James, Desjardins Securities Inc., Mackie Research Capital Corporation and Manulife Securities Incorporated.

The sales period of the overnight offering has now ended.

There was a similar offering in November 2015.

The offering price of $18.75 per unit looks pretty good compared to the November 15 NAVPU of $16.80. They’ve done well!

The fund is getting quite large (and therefore, the preferred shares are getting quite liquid!) – according to the 16H1 Financial Statements, total fund assets were $297.3-million with just over 19-million units outstanding.

Update 2016-12-2: Deal closed:

Financial 15 Split Corp. (the “Company”) is pleased to announce it has completed the overnight offering of 2,040,000 Preferred Shares and 2,040,000 Class A Shares of the Company. Total proceeds of the offering were $38.3 million, bringing the Company’s net assets to approximately $366.2 million. The shares will trade on the Toronto Stock Exchange under the existing symbols of FTN.PR.A (Preferred Shares) and FTN (Class A Shares).

The Preferred Shares were offered at a price of $10.00 per Preferred Share to yield 5.25% and the Class A Shares were offered at a price of $8.75 per Class A Share to yield 17.24%.

The offering was co-led by National Bank Financial Inc., CIBC, RBC Capital Markets, Scotia Capital Inc., and also included BMO Capital Markets, GMP Securities L.P., Canaccord Genuity Corp., Raymond James, Desjardins Securities Inc., Mackie Research Capital Corporation and Manulife Securities Incorporated.

Brookfield Asset Management Inc. has announced:

the completion of its previously announced Class A Preference Shares, Series 46 issue in the amount of C$300,000,000. The offering was underwritten on a bought deal basis by a syndicate led by TD Securities Inc. and Scotiabank.

The Preferred Shares, Series 46 were issued at a price of C$25.00 per share, for gross proceeds of C$300,000,000. Holders of the Series 46 Shares will be entitled to receive a cumulative quarterly fixed dividend yielding 4.80% annually for the initial period ending March 31, 2022. Thereafter, the dividend rate will be reset every five years at a rate equal to the greater of: (i) the 5-year Government of Canada bond yield plus 3.85%, and (ii) 4.80%. The Series 44 Shares will commence trading on the Toronto Stock Exchange this morning under the ticker symbol BAM.PF.I. The Preferred Shares, Series 46 may not be offered or sold in the United States or to U.S. persons absent registration or an applicable exemption from the registration requirements under the U.S. Securities Act.

BAM.PF.I is a FixedReset, 4.80%+385M480 announced November 10. It will be tracked by HIMIPref™ and has been assigned to the FixedReset subindex.

BAM.PF.I traded a very good 1,374,591 shares today in a range of 24.85-00 before closing at 24.95-96, 85×1. Vital statistics are:

An Implied Volatility analysis yields ambiguous results:

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While BAM.PF.I looks a little expensive in this analysis (with a theoretical price of 24.58), it must be remembered that
i) the fit is very messy
ii) the analysis makes no accounting for the reset floor

RONA Inc. has announced (although not yet on its website):

that the holders (collectively, the “Preferred Shareholders”) of record of its Cumulative 5-Year Rate Reset Series 6 Class A Preferred Shares and Cumulative Floating Rate Series 7 Class A Preferred Shares (collectively, the “Preferred Shares”) have approved the statutory plan of arrangement for the acquisition of the Preferred Shares by Gestion Lowe’s Canada, Inc., a wholly-owned subsidiary of Lowe’s Companies, Inc., for C$24 per Preferred Share, in cash, at the special meeting held today pursuant to the arrangement agreement dated Oct. 6, 2016 (the “Arrangement”).

The Arrangement was approved by 95.19% of the votes cast by the Preferred Shareholders present in person or represented by proxy at the special meeting.

The completion of the Arrangement remains subject to the granting of the final order by the Québec Superior Court and the satisfaction or waiver of the other customary closing conditions. If court approval is obtained and the other conditions to the completion of the Arrangement are satisfied or waived, RONA expects that the Arrangement will be completed on or about Nov. 18, 2016.

RON.PR.A and RON.PR.B have provided great entertainment this year and were last mentioned on PrefBlog when the Plan of Arrangement was proposed in early October.

Standard & Poor’s has announced:

• •We are revising our outlook on Montreal-based Aimia Inc. to negative from stable and affirming our ratings on the company, including our ‘BBB-‘ long-term corporate credit rating.
• •In our opinion, Aimia’s competitive position has deteriorated based on the prospect of lower growth, which contributes to a weaker assessment of Aimia’s business profile and tighter leverage threshold to maintain the investment-grade rating.
• •We estimate the company will generate adjusted debt-to-EBITDA of 2.6x-2.8x at the end of this year, which we consider high for the rating given our revised view of the business.
• •The negative outlook reflects our uncertainty about the company’s ability to sustain adjusted debt-to-EBITDA of about 2x beyond 2018.

…
“The outlook revision reflects our view that Aimia’s competitive position has deteriorated based on lower growth prospects,” said S&P Global Ratings credit analyst Alessio Di Francesco.

This contributes to a weaker assessment of Aimia’s business risk profile and a tighter leverage threshold to maintain the investment-grade rating.

In our opinion, Aimia’s growth outside of Canada should remain subdued from competitive pressures and challenging economic conditions. As such, we believe the Aeroplan program will continue to be the main driver of free cash flow for the company in the future. Although we expect positive gross billings growth and improved profitability within the program in the next couple of years, we believe EBITDA growth is below what we had previously expected. Moreover, Aimia’s commercial partnership services agreement with Air Canada expires in 2020, and we believe the renegotiation may expose the company to higher costs, lower margins, and conceivably weaker engagement. On the other hand, a new agreement could add new avenues for redemption and engagement.
…
We could lower the rating by the end of 2018 if adjusted debt-to-EBITDA does not improve to about 2x, in line with our base-case forecast. This could occur if we expect gross billings or EBITDA margins to decline at Aeroplan or if an increase in distributions contributes to negative discretionary cash flow.

We could revise the outlook to stable within the next 24 months if adjusted debt-to-EBITDA improves in line with our expectations and we believe the company will sustain leverage of about 2.0x beyond 2018.

Issues affected are AIM.PR.A, AIM.PR.B and AIM.PR.C.

DBRS has announced that it:

has today upgraded the rating of Class C Preferred Shares, Series 1 (the Preferred Shares) issued by 5Banc Split Inc. (the Company) to Pfd-2 (high).
…
As of November 3, 2016, the downside protection was approximately 72%. Based on the dividend yield on the underlying Portfolio holdings as of November 3, 2016, the Preferred Share dividend coverage ratio was approximately 2.5 times (x). The Company’s excess dividends, net of all expenses, may be distributed to the holders of the Capital Shares.

FBS.PR.C is tracked by HIMIPref™, but is relegated to the Scraps subindex on volume concerns. More information can be obtained via the company’s page maintained by its sponsor. With slightly less than 1.1-million Units outstanding, the fund is too small for investment on an active basis, but I track it anyway. The issue was last mentioned on PrefBlog when Timbercreek took over sponsorship of the fund.