Category: Issue Comments

Brompton Funds has announced:

Dividend Growth Split Corp. (the “Company”) is pleased to announce it has filed a preliminary short form base shelf prospectus, and is undertaking a treasury offering of class A and preferred shares. The final class A and preferred share offering prices will be determined so as to be non-dilutive to the net asset value per unit of the Company as of the pricing date, as adjusted for dividends and certain expenses to be accrued prior to or upon settlement of the offering.
The Company invests in a portfolio of common shares of high quality, large capitalization companies, which have among the highest dividend growth rates of those companies included in the S&P/TSX Composite Index. Currently, the portfolio consists of common shares of the following 20 companies:

Great-West Lifeco Inc.	The Bank of Nova Scotia	CI Financial Corporation	Shaw Communications Inc.
Industrial Alliance Insurance and Financial Services Inc.	Canadian Imperial Bank of Commerce	IGM Financial Inc.	TELUS Corporation
Manulife Financial Corporation	National Bank of Canada	Power Corporation of Canada	Canadian Utilities Limited
Sun Life Financial Inc.	Royal Bank of Canada	BCE Inc.	Enbridge Inc.
Bank of Montreal	The Toronto-Dominion Bank	Rogers Communications Inc.	TransCanada Corporation

The investment objectives for the class A shares are to provide holders with regular monthly cash distributions targeted to be $0.10 per class A share and to provide the opportunity for growth in the net asset value per class A share.

The investment objectives for the preferred shares are to provide holders with fixed cumulative preferential quarterly cash distributions, currently in the amount of $0.13125 per preferred share, representing a yield on the original issue price of 5.25% per annum, and to return the original issue price to holders of preferred shares on the Company’s maturity date (November 28, 2019).

The syndicate of agents for the offering is being led by RBC Capital Markets, CIBC and Scotiabank.

DGS.PR.A was last mentioned on PrefBlog in connection with its 15H1 Semi-Annual Report.

Update, 2016-4-28: Pricing and sizing announced:

Dividend Growth Split Corp. (the “Company”) is pleased to announce that the Company’s treasury offering of class A and preferred shares has been priced at $6.95 per class A share and $10.00 per preferred share. The final class A and preferred share offering prices were determined so as to be non-dilutive to the most recently calculated net asset value per unit of the Company, as adjusted for dividends and certain expenses to be accrued prior to or upon settlement of the offering, and voluntary payment of certain costs of the offering by the Manager. Gross proceeds of the offering are expected to be approximately $23 million.
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The Company intends to file a final short form base shelf prospectus along with a prospectus supplement to such final short form base shelf prospectus in each of the provinces and territories of Canada in connection with the offering. The offering is expected to close on or about May 6, 2016 and is subject to customary closing conditions including approvals of applicable securities regulatory authorities and the Toronto Stock Exchange.

The syndicate of agents for the offering is being led by RBC Capital Markets, CIBC and Scotiabank and includes TD Securities Inc., BMO Capital Markets, National Bank Financial Inc., GMP Securities L.P., Raymond James Ltd., Canaccord Genuity Corp., Desjardins Securities Inc., Industrial Alliance Securities Inc. and Mackie Research Capital Corporation.

Update, 2016-5-6: They raised $23-million:

Dividend Growth Split Corp. (the “Company”) is pleased to announce that it has completed a treasury offering of 1,357,000 class A shares and 1,357,000 preferred shares for aggregate gross proceeds of $23 million. The class A shares and preferred shares will continue to trade on the Toronto Stock Exchange under the existing symbols DGS (class A shares) and DGS.PR.A (preferred shares).

TransCanada Corporation has announced:

that it has completed its public offering of cumulative redeemable minimum rate reset first preferred shares, series 13 (the “Series 13 Preferred Shares”). TransCanada issued 20 million Series 13 Preferred Shares for aggregate gross proceeds of $500 million through a syndicate of underwriters co-led by TD Securities Inc., BMO Capital Markets and Scotiabank.

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 13 Preferred Shares will begin trading today on the TSX under the symbol TRP.PR.J.

TRP.PR.J is a FixedReset, 5.50%+469M550, announced April 13.

The issue traded 1,623,504 shares today (consolidated exchanges) in a range of 25.50-72 before closing at 25.66-68, 5×5. Given that the TXPL Total Return index is basically flat since announcement date, this is very good performance. Vital statistics are:

Implied Volatility shows some change since announcement day:

Click for Big

Since announcement day, implied volatility appears to have declined, but this may be simply an artefact of the data: the high-spread TRP.PR.J has an enormous influence on the calculation and since it has increased in price, reducing the Expected Future Current Yield, this results in a reduction of the slope between the many lower-spread and the single higher-spread issue, leading to reduced implied volatility. We need more data!

Canadian General Investments, Limited has announced:

that it has provided notice to holders of its $75,000,000 3.90% Cumulative Redeemable Class A Preference Shares, Series 3 (the “Series 3 Shares”) that in accordance with the terms of the Series 3 Shares it will redeem all of the issued and outstanding Series 3 Shares on June 10, 2016 (the “Redemption Date”), for a price of $25.00 per Series 3 Share plus all accrued and unpaid dividends (from and including the last scheduled dividend payment date, March 15, 2016, to, but excluding, the Redemption Date, and being in the amount of $0.23240 per share).

The issue would have become retractible at 25.00 on June 15, so this is something of a pre-emptive redemption.

Update, 2016-6-10: They have now announced that they have:

completed the previously announced redemption of its $75,000,000 3.90% Cumulative Redeemable Class A Preference Shares, Series 3. This redemption was in accordance with the terms of the Series 3 shares.

The aggregate amount of $75,697,200 (including accrued and unpaid dividends from March 15, 2016 to, but excluding, June 10, 2016) was funded primarily through CGI’s recently announced $75,000,000 secured credit facility with a Canadian chartered bank. The credit facility is a non-revolving, three-year fixed rate facility that bears interest at 2.28% per annum to be paid quarterly.

CGI has engaged in a leverage strategy since its first issuance of Class A preference shares in 1998 in an effort to enhance returns to common shareholders.

BCE Inc. has announced:

BCE Inc. will, on May 1, 2016, continue to have Cumulative Redeemable First Preferred Shares, Series AG (“Series AG Preferred Shares”) outstanding if, following the end of the conversion period on April 21, 2016, BCE Inc. determines that at least 2 million Series AG Preferred Shares would remain outstanding. In such a case, as of May 1, 2016, the Series AG Preferred Shares will pay, on a quarterly basis, as and when declared by the Board of Directors of BCE Inc., a fixed cash dividend for the following five years that will be based on an annual fixed dividend rate equal to 2.80%.

The previous dividend was 4.50%, so the current dividend represents a cut of 38%.

As previously discussed, BCE.PR.G is interconvertible with BCE.PR.H, with the deadline for notification of the company being April 21; this interconvertibility repeats every five years. BCE.PR.H is a RatchetRate preferred, currently paying 100% of prime based on par value; this percentage of prime will be reduced only if the trading price for a given month exceeds 25.00, a circumstance that is currently of rather low probability.

A recommendation regarding which of the two elements of the Strong Pair is preferable will be made shortly prior to the expiration of the notification period.

DBRS has announced that it:

has today confirmed its rating of the Cumulative Preferred Shares of Canaccord Genuity Group Inc. (Canaccord Genuity or the Company) at Pfd-3 (low). The trend has been revised to Negative from Stable.
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The Negative trend reflects the significant headwinds facing the Company, which are driving weak results and low returns. While Canaccord Genuity’s variable expense structure is an important factor underpinning its solid expense control, results were notably weak 9M 2016, resulting in an inability to reduce compensation commensurately. DBRS views this as appropriate from a franchise perspective, given the Company’s need to retain and attract top talent. The challenge is balancing the need to generate returns and grow capital through retained earnings, which continue to be significantly challenged, while continuing to invest in the franchise. DBRS expects that the Company’s earnings will remain significantly pressured over the near to medium term.

Signs of sustained earnings deterioration would likely add negative rating pressure, particularly if capital levels continue to be eroded. Increased pressure on the Company’s cash flows could also pressure the rating. Furthermore, as with all broker-dealers, any significant reputational issues would likely pressure ratings. On the other hand, further franchise diversification that contributes to sustained and improving earnings trends across businesses would provide support to the current rating level.

The trend was assessed as Negative in 2011, then revised to Stable in 2014.

Assiduous Readers will remember that GMP.PR.C has sprung into existence as a result of a 22% conversion from FN.PR.A. I recommended against conversion. GMP.PR.B has reset for the next five years at 3.611%, while GMP.PR.C will pay 3-Month Bills +289bp, reset quarterly.

GMP.PR.C was listed today, but there was no trading. This issue will be tracked by HIMIPref™ but has been relegated to the Scraps index on credit concerns.

Vital statistics for the two issues are:

Assiduous Readers will remember that FN.PR.B has sprung into existence as a result of a 28% conversion from FN.PR.A. I recommended against conversion. FN.PR.A has reset for the next five years at 2.79%, while FN.PR.B will pay 3-Month Bills +207bp, reset quarterly.

FN.PR.B was listed today, but there was no trading and no offer. This issue will be tracked by HIMIPref™ but has been relegated to the Scraps index on credit concerns.

Vital statistics for the two issues are:

Canadian Western Bank has announced:

that it has closed its domestic public offering of non-cumulative 5-year rate reset First Preferred Shares Series 7 (Non-Viability Contingent Capital (NVCC)) (the “Series 7 Preferred Shares”). CWB issued 5,600,000 Series 7 Preferred Shares at a price of $25 per share to raise gross proceeds of $140 million. The offering was underwritten on a bought deal basis by a syndicate led by National Bank Financial Inc. Net proceeds from the offering will be added to CWB’s capital base and used for general corporate purposes and are expected to qualify as Tier 1 capital for CWB.

The Series 7 Preferred Shares will commence trading on the Toronto Stock Exchange today under the ticker symbol CWB.PR.C. The offering of Series 7 Preferred Shares was completed by way of short form prospectus dated March 22, 2016, and filed in all provinces and territories of Canada.

CWB.PR.C is a FixedReset, 6.25%+547, NVCC, announced 2016-3-10. It will be tracked by HIMIPref™ but has been relegated to the Scraps index on credit concerns.

The issue traded 692,786 shares today (consolidated exchanges) in a range of 25.20-38 before closing at 25.30-33, 4×3. Vital statistics are:

The performance of this issue may be considered somewhat disappointing, given that TXPL is up 5.32% between the March 10 announcement date and the March 31 closing date – although a certain amount of underperformance is expected in a rising market due to negative convexity.

Husky Energy has announced:

that more than one million of its 12,000,000 Cumulative Redeemable Preferred Shares, Series 1 (Series 1 Shares) have been elected for conversion on a one-for-one basis into Cumulative Redeemable Preferred Shares, Series 2 (Series 2 Shares), effective March 31, 2016.

As of March 31, 2016, Husky Energy will have 10,435,932 Series 1 Shares and 1,564,068 Series 2 Shares issued and outstanding. The Series 1 Shares are listed on the Toronto Stock Exchange under the symbol HSE.PR.A and the Series 2 Shares are listed under HSE.PR.B.

HSE.PR.B will pay 3-Month bills +173bp paid on par value, reset quarterly.

There was no trading of the issue. Given the wide spread of the closing quote of 8.80-12.00, 1×1, any sort of price comparison with HSE.PR.A and other FloatingResets must await a tighter market.

For what it’s worth (not much), vital statistics are:

RONA Inc. has announced:

that the holders of record of its common shares (the “Common Shareholders”) have approved the statutory plan of arrangement at the special meeting held today pursuant to the arrangement agreement entered into on February 2, 2016 (the “Arrangement”).

The Arrangement was approved by 99,92% of the 75,067,870 votes cast by Common Shareholders at the special meeting representing 70,22% of the total 106,904,501 common shares outstanding as at February 25, 2016, being the record date of the special meeting (the “Record Date”).

“The vote of RONA common shareholders in favor of the transaction with Lowe’s is an important step,” said Robert Chevrier, Chairman of the Board of RONA. “We are now working to obtain approvals from Canadian regulatory authorities, namely the Competition Bureau and Industry Canada. Once all regulatory approvals are obtained, we will be able to complete the Arrangement.”

Holders of record of RONA’s Cumulative 5-Year Rate Reset Series 6 Class A Preferred Shares (the “Preferred Shareholders”) did not approve the Arrangement, with 25.21% of the 2,968,029 votes cast by Preferred Shareholders voting in favor of the Arrangement, which required the approval of 66⅔% of the votes cast by such shareholders. The votes cast by Preferred Shareholders represented 43.01% of the total 6,900,000 Cumulative 5-Year Rate Reset Series 6 Class A Preferred Shares outstanding as at the Record Date.

As previously announced, completion of the Arrangement is not conditional on approval by the Preferred Shareholders and, given that the requisite approval of the Preferred Shareholders was not obtained, RONA’s 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”) will be excluded from the Arrangement (including, for greater certainty, to remove the rights of the holders to demand repurchase of their Preferred Shares).

The completion of the Arrangement remains subject to the granting of the final order by the Québec Superior Court, the receipt of required regulatory approvals and the satisfaction or waiver of the other customary closing conditions.

Until completion of the Arrangement, RONA’s common shares and the Preferred Shares will continue to be listed for trading on the Toronto Stock Exchange. Following completion of the Arrangement, the Preferred Shares will remain outstanding in accordance with their terms and will continue to be listed for trading on the Toronto Stock Exchange.

Well, I must confess I’m surprised that the preferred shareholders turned down the offer and astonished that the margin of defeat was so wide. I can only suppose that the moronic whimpering about some ludicrous interpretation of “fairness” had a lot of currency among the voters … but I have no wish to rehash all the arguments I have put forward and reviewed with respect to the vote in prior posts:

• RON.PR.A: Lowe’s Offers $20 As Part Of Takeover
• RON.PR.A Grumblers Get An Ally
• RON.PR.A Vote: Yes or No?
• The not-so-pleasant choices faced by RONA’s preferred shareholders [RON.PR.A]

Vital statistics for the two issues are: