Category: Issue Comments

Sun Life Financial Inc. has announced:

the dividend rates for its Class A Non-Cumulative Rate Reset Preferred Shares Series 10R (the “Series 10R Shares”) and Class A Non-Cumulative Floating Rate Preferred Shares Series 11QR (the “Series 11QR Shares”).

With respect to any Series 10R Shares that remain outstanding after September 30, 2016, commencing as of that date, holders thereof will be entitled to receive non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of Sun Life Financial and subject to the Insurance Companies Act (Canada). The dividend rate for the five-year period commencing on September 30, 2016 to but excluding September 30, 2021 will be 2.842% per annum or $0.177625 per share per quarter, being equal to the sum of the Government of Canada Yield, as defined in the terms of the Series 10R Shares, on Wednesday, August 31, 2016 plus 2.17%, as determined in accordance with the terms of the Series 10R Shares.

With respect to any Series 11QR Shares that are issued on September 30, 2016, holders thereof will be entitled to receive floating rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of Sun Life Financial and subject to the Insurance Companies Act (Canada), based on a dividend rate equal to the sum of the T-Bill Rate, as defined in the terms of the Series 11QR Shares, plus 2.17% (calculated on the basis of the actual number of days elapsed in such Quarterly Floating Rate Period divided by 365 days), subject to certain adjustments in accordance with the terms of the Series 11QR Shares. The dividend rate for the period commencing on September 30, 2016 to but excluding December 31, 2016 will be equal to 2.682% per annum or $0.169003 per share, as determined in accordance with the terms of the Series 11QR Shares.

Beneficial owners of Series 10R Shares who wish to exercise the right of conversion should communicate as soon as possible with their broker or other nominee and should ensure that their instructions are followed in order to meet the deadline to exercise such right of conversion, which is 5:00 p.m. (ET) on Thursday, September 15, 2016.

An application will be made to list the Series 11QR Shares on the Toronto Stock Exchange.

I previously reported the notice of extension.

SLF.PR.H is a FixedReset, 3.90%+217, that commenced trading 2011-8-12 after being announced 2011-8-4. The reset dividend therefore represents a dividend cut of 27%.

As the issue does not have a NVCC clause, I have followed my current policy and added a Deemed Maturity entry to the call schedule for 2025-1-31 in the expectation that the NVCC rules will be imposed on insurers and insurance holding companies in the reasonably near future.

As noted, the deadline for notifying the company of a desire to convert is 5:00 p.m. (ET) on September 15, 2016, but note that custodians of your shares will have internal deadlines a day or two earlier. Hence, I will make a recommendation on whether or not to convert on September 12, 2016.

Intact Financial Corporation has announced:

that it does not intend to exercise its right to redeem all or any part of the currently outstanding Non-cumulative Rate Reset Class A Shares Series 3 of IFC (the “Series 3 Preferred Shares”) (TSX: IFC.PR.C) on September 30, 2016. As a result, subject to certain conditions set out in the prospectus supplement dated August 11, 2011 relating to the issuance of the Series 3 Preferred Shares (the “Prospectus”), the holders thereof will have the right, at their option, to elect to convert all or any of their Series 3 Preferred Shares into Non-cumulative Floating Rate Class A Shares Series 4 of IFC (the “Series 4 Preferred Shares”) on a one-for-one basis on September 30, 2016. Holders who do not exercise their right to convert their Series 3 Preferred Shares into Series 4 Preferred Shares on such date will retain their Series 3 Preferred Shares, unless automatically converted in accordance with the conditions below.

With respect to any Series 3 Preferred Shares that remain outstanding after September 30, 2016, commencing as of such date, holders thereof will be entitled to receive fixed non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of IFC. The annual dividend rate for the Series 3 Preferred Shares for the five-year period from and including September 30, 2016 to but excluding September 30, 2021 will be 3.332%, as determined in accordance with the terms of the Series 3 Preferred Shares.

With respect to any Series 4 Preferred Shares that may be issued on September 30, 2016, holders thereof will be entitled to receive floating rate non-cumulative preferential cash dividends on a quarterly basis, as and when declared by the Board of Directors of IFC. The dividend rate for the Series 4 Preferred Shares for the 3-month floating rate period from and including September 30, 2016 to but excluding December 31, 2016 will be 0.79733% (3.172% on an annualized basis), as determined in accordance with the terms of the Series 4 Preferred Shares (the “Floating Quarterly Dividend Rate”). The Floating Quarterly Dividend Rate will be reset every quarter.

The foregoing conversion right is subject to the conditions that: (i) if IFC determines that there would be less than 1,000,000 Series 3 Preferred Shares outstanding on September 30, 2016, then all remaining Series 3 Preferred Shares will automatically be converted into an equal number of Series 4 Preferred Shares on September 30, 2016, and (ii) alternatively, if IFC determines that there would be less than 1,000,000 Series 4 Preferred Shares outstanding on September 30, 2016, then no Series 3 Preferred Shares will be converted into Series 4 Preferred Shares. In either case, IFC will give written notice to that effect to any registered holders of Series 3 Preferred Shares on or before September 23, 2016.

The Series 3 Preferred Shares are issued in “book entry only” form and must be purchased or transferred through a participant in the CDS depository service (“CDS Participant”). All rights of holders of Series 3 Preferred Shares must be exercised through CDS or the CDS Participant through which the Series 3 Preferred Shares are held. The deadline for the registered shareholder to provide notice of exercise of the right to convert Series 3 Preferred Shares into Series 4 Preferred Shares is 5:00 p.m. (ET) on September 15, 2016. Any notices received after this deadline will not be valid. As such, holders of Series 3 Preferred Shares who wish to exercise their right to convert their shares should contact their broker or other intermediary for more information and it is recommended that this be done well in advance of the deadline in order to provide the broker or other intermediary with time to complete the necessary steps.

Holders of the Series 3 Preferred Shares and the Series 4 Preferred Shares will have the opportunity to convert their shares again on September 30, 2021, and every five years thereafter as long as the shares remain outstanding. Subject to certain conditions described in the Prospectus, IFC may redeem the Series 3 Preferred Shares, in whole or in part, on September 30, 2021 and on September 30 every five years thereafter and may redeem the Series 4 Preferred Shares, in whole or in part, after September 30, 2016.

The Toronto Stock Exchange (“TSX”) has conditionally approved the listing of the Series 4 Preferred Shares effective on conversion. Listing of the Series 4 Preferred Shares is subject to IFC fulfilling all of the listing requirements of the TSX.

For more information on the terms of, and risks associated with an investment in, the Series 3 Preferred Shares and the Series 4 Preferred Shares, please see IFC’s prospectus supplement dated August 11, 2011 which is available on www.sedar.com.

IFC.PR.C is a FixedReset, 4.20%+266, that commenced trading 2011-8-18 after being announced 2011-8-9. Hence the reset represents a dividend cut of 21%.

As the issue does not have a NVCC clause, I have followed my current policy and added a Deemed Maturity entry to the call schedule for 2025-1-31 in the expectation that the NVCC rules will be imposed on insurers and insurance holding companies in the reasonably near future.

As noted, the deadline for notifying the company of a desire to convert is 5:00 p.m. (ET) on September 15, 2016, but note that custodians of your shares will have internal deadlines a day or two earlier. Hence, I will make a recommendation on whether or not to convert on September 12, 2016.

BMO.PR.A, the new FloatingReset that has come into existence via partial exchange from BMO.PR.Q, is now trading.

The 19% conversion rate has been reported previously. BMO.PR.Q now pays 1.805% (on par) until 2021-8-25, while BMO.PR.A will pay 3-month bills +115bp, reset quarterly.

BMO.PR.A closed August 26 with a quote of 20.00-25.00 (!).

Vital statistics are:

It will be noted that the prospectus does not mention the NVCC rules except as follows:

The Basel Committee on Banking Supervision has announced new international bank capital adequacy rules (commonly called Basel III) which will amend the existing Basel II capital management framework. The Office of the Superintendent of Financial Institutions of Canada (‘‘OSFI’’) has announced that it plans to adopt the new Basel III rules for purposes of Canadian bank capital guidelines. Under the new Basel III rules, effective January 1, 2013, all non-common Tier 1 and Tier 2 capital instruments issued by a bank must have, either in their contractual terms and conditions or by way of statute in the issuer’s home country, a clause requiring a full and permanent conversion into common shares of such bank upon certain trigger events at the point where such bank is determined to be no longer viable. The Preferred Shares Series 25 and, if and when issued, the Preferred Shares Series 26 as a result may not fully qualify as non-common Tier 1 capital under the new capital rules as no such conversion mechanism exists. For purposes of being included in the Bank’s regulatory capital under the new capital rules, the Preferred Shares Series 25 and the Preferred Shares Series 26 would be phased out beginning January 31, 2013 (their recognition will be capped at 90% of total Tier 1 capital from January 1, 2013, with the cap reducing by 10% in each subsequent year). As a result, the Bank may, with the prior approval of the Superintendent, redeem the Preferred Shares Series 25 and the Preferred Shares Series 26, if any, in accordance with their respective terms.

Accordingly, I treat these shares as having a DeemedRetraction for analytical purposes, which results in the ‘Hard Maturity’ dated 2022-1-31 in the box above.

The $0.10 price difference between the two elements of the Strong Pair BMO.PR.Q / BMO.PR.A implies a break-even three-month bill rate of +0.57% – at the high end of the range defined by other investment-grade Strong Pairs.

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Standard & Poor’s has announced:

• •We are revising our outlook on Husky Energy Inc. to stable from negative.
• •We are also affirming our ratings on the company, including our ‘BBB+’ long-term corporate credit rating (CCR) on Husky.
• •The outlook revision reflects the company’s successful completion of asset sales to date, which have strengthened cash flow metrics (on a net debt basis) above our forecast estimates from October 2015.
• •The ‘BBB+’ CCR reflects a ‘bbb’ initial anchor score, and the application of a one-notch enhancement due to our assessment of Husky as a moderately strategic holding for its major shareholder.
• •We are also removing the positive CRA modifier, because the factors supporting its initial application have been satisfied.

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We would lower the rating to ‘BBB’ if the company’s financial risk profile deteriorates materially from our current estimates. Specifically, we would lower the rating if Husky’s three-year, weighted-average FFO-to-debt ratio fell below 30%, and we believed it would remain below this threshold consistently. FFO-to-debt ratios below this level would neither support a ‘bbb’ anchor nor the application of a positive CRA modifier.

Based on our current assessment of Husky’s business risk profile, which we do not expect to strengthen during our 24-month outlook period, we do not believe the company’s financial risk profile could strengthen to the level necessary to support an ‘A-‘ rating. To support that rating, Husky’s three-year, weighted-average FFO-to-debt ratio would have to strengthen and remain above 60%, and the company would need to consistently generate positive FOCF such that its FOCF-to-debt ratio would remain above 40%. Due to the oil and gas industry’s capital-intensive nature, we do not believe an oil and gas company could generate and sustain positive FOCF at these levels, so an upgrade to ‘A-‘ is not likely during our outlook period.

Affected issues are HSE.PR.A, HSE.PR.B, HSE.PR.C, HSE.PR.E and HSE.PR.G.

Canaccord Genuity Group Inc. has announced:

that it does not intend to exercise its right to redeem all or any part of the currently outstanding Cumulative 5-Year Rate Reset First Preferred Shares, Series A of the Company (the “Series A Preferred Shares”) on September 30, 2016 (the “Conversion Date”). There are currently 4,540,000 Series A Preferred Shares outstanding.

As a result and subject to certain conditions set out in the short form prospectus dated June 16, 2011 relating to the issuance of the Series A Preferred Shares, the holders of the Series A Preferred Shares have the right, at their option, to convert all or any of their Series A Preferred Shares, on a one-for-one basis, into Cumulative Floating Rate First Preferred Shares, Series B of the Company (the “Series B Preferred Shares”) on the Conversion Date (the “Conversion Privilege”). A formal notice of the Conversion Privilege will be sent to the registered holder of the Series A Preferred Shares.
Holders who do not exercise their right to convert their Series A Preferred Shares into Series B Preferred Shares will continue to hold their Series A Preferred Shares and will have the opportunity to convert their shares again on September 30, 2021, and every five years thereafter as long as the shares remain outstanding.

The foregoing Conversion Privilege is subject to the following conditions: (i) if the Company determines that there would be less than 1,000,000 Series B Preferred Shares outstanding on the Conversion Date, then holders of Series A Preferred Shares will not be entitled to convert their shares into Series B Preferred Shares; and (ii) alternatively, if the Company determines that there would remain outstanding less than 1,000,000 Series A Preferred Shares on the Conversion Date, then all remaining Series A Preferred Shares will automatically be converted into Series B Preferred Shares on a one-for-one basis on the Conversion Date. In either case, the Company will give written notice to that effect to any registered holders affected by the preceding conditions of the Series A Preferred Shares no later than September 23, 2016.

The dividend rate applicable to the Series A Preferred Shares for the five-year period commencing on October 1, 2016 and ending on and including September 30, 2021, and the dividend rate applicable to the Series B Preferred Shares for the three-month period commencing on October 1, 2016 and ending on and including December 31, 2016, will be determined and announced by way of a press release on September 1, 2016.

Beneficial owners of Series A Preferred Shares who wish to exercise their Conversion Privilege should communicate as soon as possible with their broker or other nominee to obtain instructions for exercising such right during the conversion period, which runs from August 31, 2016 until 5:00 p.m. (Toronto time) on September 15, 2016.

No surprise here, since CF.PR.A is a 5.50%+321 FixedReset that commenced trading 2016-6-23 after being announced 2011-6-6. CF.PR.A is tracked by HIMIPref™ but relegated to the Scraps index on credit concerns.

Sun Life Financial Inc. has announced:

that it does not intend to exercise its right to redeem its outstanding Class A Non-Cumulative Rate Reset Preferred Shares Series 10R (the “Series 10R Shares”) on September 30, 2016. As a result, subject to certain conditions, the holders of Series 10R Shares will have the right, at their option, to convert all or part of their Series 10R Shares on a one-for-one basis into Class A Non-Cumulative Floating Rate Preferred Shares Series 11QR of Sun Life Financial (the “Series 11QR Shares”) on September 30, 2016. Holders of Series 10R Shares who do not exercise their right to convert their Series 10R Shares into Series 11QR Shares on that date will retain their Series 10R Shares.

The foregoing conversions are subject to the following conditions: (i) if Sun Life Financial determines that there would be less than one million Series 10R Shares outstanding after September 30, 2016, then all remaining Series 10R Shares will automatically be converted into Series 11QR Shares on a one-for-one basis on September 30, 2016, and (ii) alternatively, if Sun Life Financial determines that there would be less than one million Series 11QR Shares outstanding after September 30, 2016, no Series 10R Shares will be converted into Series 11QR Shares. In either case, Sun Life Financial will give written notice to that effect to any registered holder affected by the preceeding minimums on or before Thursday, September 22, 2016.

The dividend rate applicable to the Series 10R Shares for the five-year period commencing on September 30, 2016 to but excluding September 30, 2021, and the dividend rate applicable to the Series 11QR Shares for the three-month period commencing on September 30, 2016 to but excluding December 31, 2016, will be determined on Wednesday, August 31, 2016 and will be announced in a news release on August 31, 2016.

Beneficial owners of Series 10R Shares who wish to exercise their right of conversion should communicate as soon as possible with their broker or other nominee and should ensure that their instructions are followed in order to ensure that the deadline to exercise such right of conversion is met, which is 5:00 p.m. (ET) on Thursday, September 15, 2016.

Subject to regulatory approval, Sun Life Financial: (i) may redeem the Series 10R Shares and the Series 11QR Shares in whole or in part on September 30, 2021 and on the 30th of September in every fifth year thereafter by the payment of an amount for each share so redeemed of $25.00, together with all declared and unpaid dividends to the date fixed for such redemption, and (ii) may redeem the Series 11QR Shares in whole or in part on any other date after September 30, 2016 by the payment of an amount for each share so redeemed of $25.50, together with all declared and unpaid dividends to the date fixed for such redemption.

An application will be made to list the Series 11QR Shares on the Toronto Stock Exchange.

No surprises here, since SLF.PR.H is a FixedReset, 3.90%+217, that commenced trading 2011-8-12 after being announced 2011-8-4. SLF.PR.H is tracked by HIMIPref™ and assigned to the FixedResets subindex; in my analysis I assume a Deemed Retraction. I will report on the new dividend rate when it is announced.

Bank of Montreal has announced:

that 2,174,393 of its 11.6 million Non-Cumulative 5-Year Rate Reset Class B Preferred Shares, Series 25 (the “Preferred Shares Series 25”) will be converted on August 25, 2016, on a one-for-one basis, into Non-Cumulative Floating Rate Class B Preferred Shares, Series 26 of the Bank (the “Preferred Shares Series 26”). As a result, on August 25, 2016, the Bank will have 9,425,607 Preferred Shares Series 25 and 2,174,393 Preferred Shares Series 26 issued and outstanding. The Preferred Shares Series 25 are listed and the Preferred Shares Series 26 will be listed on the Toronto Stock Exchange under the symbols BMO.PR.Q and BMO.PR.A, respectively.

BMO.PR.Q was issued 2011-3-11 as a FixedReset 3.90%+115 announced 2011-3-2. Its extension and reset to 1.805% have been reported on PrefBlog. It will be noted that the prospectus does not mention the NVCC rules except as follows:

The Basel Committee on Banking Supervision has announced new international bank capital adequacy rules (commonly called Basel III) which will amend the existing Basel II capital management framework. The Office of the Superintendent of Financial Institutions of Canada (‘‘OSFI’’) has announced that it plans to adopt the new Basel III rules for purposes of Canadian bank capital guidelines. Under the new Basel III rules, effective January 1, 2013, all non-common Tier 1 and Tier 2 capital instruments issued by a bank must have, either in their contractual terms and conditions or by way of statute in the issuer’s home country, a clause requiring a full and permanent conversion into common shares of such bank upon certain trigger events at the point where such bank is determined to be no longer viable. The Preferred Shares Series 25 and, if and when issued, the Preferred Shares Series 26 as a result may not fully qualify as non-common Tier 1 capital under the new capital rules as no such conversion mechanism exists. For purposes of being included in the Bank’s regulatory capital under the new capital rules, the Preferred Shares Series 25 and the Preferred Shares Series 26 would be phased out beginning January 31, 2013 (their recognition will be capped at 90% of total Tier 1 capital from January 1, 2013, with the cap reducing by 10% in each subsequent year). As a result, the Bank may, with the prior approval of the Superintendent, redeem the Preferred Shares Series 25 and the Preferred Shares Series 26, if any, in accordance with their respective terms.

Accordingly, I treat these shares as having a DeemedRetraction for analytical purposes.

BMO.PR.Q is tracked by HIMIPref™ and assigned to the FixedReset subindex. I regret to say I neglected to make a recommendation regarding conversion.

DBRS has announced that it:

has today downgraded Bell Canada’s (Bell Canada or the Company) Issuer Rating and Debentures and MTN Debentures rating to BBB (high) from A (low), its Subordinated Debentures rating to BBB (low) from BBB as well as its Commercial Paper (CP) rating to R-2 (high) from R-1 (low). With Bell Canada’s Issuer Rating at BBB (high), DBRS has also downgraded BCE Inc.’s (BCE; Bell Canada’s parent company) Issuer Rating and Unsecured Debentures rating to BBB from BBB (high), its CP rating to R-2 (middle) from R-1 (low) as well as its All Classes Preferred Shares rating to Pfd-3 from Pfd-3 (high). All trends are Stable.
…
Incorporating both the MTS acquisition as well as the Q9 transaction, DBRS does not see a clear path for Bell Canada to reduce gross debt-to-EBITDA toward 2.0x by mid-2017. Additionally, DBRS estimates that the Company’s pro forma free cash flow (after dividends)-to-total debt will remain below 5% over the near to medium term because of high capital intensity and dividend payouts, which could limit management’s ability to deleverage adequately. Further exacerbating this is an increasingly challenging operating climate marked by intensifying competition in the wireless market; increased risks in the media business, including structural (cord shaving/cord cutting and over-the-top video streaming) and regulatory changes (pick and pay) affecting television broadcasting, coupled with weakness in advertising.

That said, DBRS considers Bell Canada to now be at the high end of the BBB (high) rating category. DBRS views the Company as a best-in-class telecommunications operator, exemplified by a track record of consistent EBITDA growth, industry-leading wireless average revenue per user and post-paid subscriber growth as well as sound wireline performance. Furthermore, Bell Canada has a well-entrenched market position, strong operating cash flows and coverage ratios. DBRS expects that the Company will continue to perform well operationally, and will grow pro forma EBITDA steadily above $9.0 billion over the near term to medium term, through both organic growth and the above-noted acquisitions. In terms of financial leverage, DBRS believes that debt-to-EBITDA of up to 2.75x would be commensurate with the current rating categories while continuing to consider evolving free cash flow (after dividends) levels and business risks.

DBRS’ Review-Negative was previously reported on PrefBlog.

Affected issues are (deep breath):BCE.PR.A, BCE.PR.B, BCE.PR.C, BCE.PR.D, BCE.PR.E, BCE.PR.F, BCE.PR.G, BCE.PR.H, BCE.PR.I, BCE.PR.J, BCE.PR.K, BCE.PR.M, BCE.PR.N, BCE.PR.O, BCE.PR.Q, BCE.PR.R, BCE.PR.S, BCE.PR.T, BCE.PR.Y and BCE.PR.Z.

Veresen Inc. has announced:

it will pursue the sale of its power generation business and will suspend its Premium Dividend™ and Dividend Reinvestment Plan. Proceeds from the divestiture will be invested to develop Veresen’s significant inventory of contracted capital projects in the core natural gas and NGL infrastructure business.
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Divestiture of Power Business and Funding Strategy

Veresen’s power business, which consists of approximately 625 MW of primarily renewable and gas-fired generation, is expected to contribute EBITDA of approximately $100 million in 2016 and had asset level debt financing of $382 million at June 30, 2016. Veresen has engaged TD Securities Inc. as the company’s sole financial advisor on the divestiture of the power business.

Veresen intends to initially apply the proceeds of the sale of the power business to reduce its debt outstanding and subsequently fund the remaining equity component of projects currently under construction through 2018. At the end of the second quarter, approximately $535 million of the aggregate $1.4 billion of capital required to complete Veresen’s existing capital projects had been incurred, with a remaining equity component of approximately $350 to $450 million. The enhanced funding plan will meaningfully improve the company’s balance sheet strength at closing, eliminating the need for external equity financing for these projects and increasing growth on a per share basis.

Dividend and Suspension of DRIP

Veresen’s Board of Directors has confirmed the annualized dividend rate of $1.00 per Common Share. As a result of the growth and diversification of Veresen’s businesses over the last five years, the dividend is now underpinned entirely by distributable cash from take-or-pay and fee-for-service businesses with a weighted average contract life of over eight years.

In response, DBRS has announced that it:

has today placed the Issuer Rating, Senior Unsecured Notes rating and Preferred Share rating of Veresen Inc. (Veresen or the Company) Under Review with Negative Implications. The rating actions follow the Company’s announcement that it will pursue the sale of its power generation business and will suspend its Premium Dividend and Dividend Reinvestment Plan (DRIP) from August 2016. Proceeds from the divestiture of the power business will be invested to develop Veresen’s significant inventory of approximately CAD 1.4 billion of contracted capital projects in the core natural gas and natural gas liquids infrastructure business. The Company will also maintain its current dividend payout.

DBRS believes that the above-noted announcement is negative with respect to Veresen’s business risk profile.
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DBRS notes that Veresen had previously planned to fund its share of the large capital expenditure program at Veresen Midstream by raising equity through its DRIP. Veresen’s decision to suspend the DRIP and maintain its high dividend payout is expected to erode the Company’s equity base from current levels, resulting in higher non-consolidated leverage. The net proceeds from the proposed sale of power assets after repaying related subsidiary level debt (CAD 382 million at June 30, 2016) are expected to fund Veresen’s large capital expenditure program. Although, this results in an initial reduction in leverage, Veresen will likely need incremental borrowings to fund its capex and dividend commitments going forward. As a result, the Company’s non-consolidated credit metrics are likely to be weak in the medium term.

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 Versen’s ratings Under Review with Negative Implications. DBRS expects any downgrade of the Company’s ratings to be one notch. DBRS will further review the details relating to the sale of the power business as they become available, with a view to resolving the Under Review with Negative Implications status.

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

Brookfield Office Properties has announced (although not yet on their website):

that BPY and other related entities of BPY have provided full and unconditional guarantees (the “Guarantees”) for all of the Company’s Class AAA Preference Shares (the “Preference Shares”) and all of the debt securities of the Company issued pursuant to its indenture dated December 8, 2009 (the “Debt Securities”).

At the time of entering into the Guarantees, the Company had C$2,363 million of Preference Shares outstanding and C$350 million principal amount of Debt Securities outstanding. As a result of the Guarantees, the Company has received an exemption from the requirements to file certain continuous disclosure documents with Canadian securities regulators, including financial statements, on the basis that holders of the Preference Shares and the Debt Securities will have access to certain continuous disclosure filings on BPY as the guarantor. Certain financial information of the Company will be included in the consolidated summary financial information in BPY’s consolidated annual financial statements and interim reports going forward. This will simplify the Company’s reporting requirements and reduce costs.

Each of the Guarantees will terminate (subject to any existing rights or claims at the time of such termination) upon, among other things, the date that no Preference Shares or Debt Securities, respectively, are outstanding. A copy of the Guarantees have been filed on SEDAR under the profile of the Company. Investors should refer to that filing for the complete terms of the Guarantees.

In response, DBRS has announced that it:

has today placed the ratings of Brookfield Office Properties Inc.’s (Brookfield or the Company) Senior Unsecured Notes and Cumulative Redeemable Preferred Shares, Class AAA (Preferred Shares) Under Review with Developing Implications. This rating action follows the announcement yesterday that Brookfield Property Partners (BPY) and other related entities of BPY will provide full and unconditional guarantees for all of Brookfield’s Senior Unsecured Notes ($350 million in principal amounts) and all of Brookfield’s Preferred Shares ($2.4 billion outstanding) at the time of entering into the guarantees.

DBRS will review the implications of the announcement and assess the credit risk profile of BPY, which is an indirect holding company of Brookfield, against the DBRS methodology, “Rating Holding Companies and Their Subsidiaries” (January 2016). DBRS will also review the guarantee documents for Brookfield’s Senior Unsecured Notes and Preferred Shares against the DBRS Criteria “Guarantees and Other Forms of Support” (February 2016). DBRS aims to resolve the Under Review status over the next several weeks.

Affected issues are: BPO.PR.A, BPO.PR.C, BPO.PR.J, BPO.PR.K, BPO.PR.N, BPO.PR.P, BPO.PR.R, BPO.PR.T, BPO.PR.W BPO.PR.X and BPO.PR.Y.

It is interesting to see another company reduce its reporting obligations by having its parent reporting issuer provide a guarantee. RONA recently did the same with a guarantee from Lowe’s.