Category: Issue Comments

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.
…
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:

TransAlta Corporation has announced:

that 1,824,620 of its 12,000,000 Cumulative Redeemable Rate Reset Preferred Shares, Series A (the “Series A Shares”) have been converted, on a one-for-one basis, into Cumulative Redeemable Floating Rate Preferred Shares, Series B (the “Series B Shares”). As a result of the conversion, TransAlta has 10,175,380 Series A Shares and 1,824,620 Series B Shares issued and outstanding.

The Series B Shares will begin trading on the Toronto Stock Exchange (TSX) today under the symbol TA.PR.E. The Series A Shares will continue to be listed on the TSX under the symbol TA.PR.D.

The 15% conversion rate has been reported previously; Assiduous Readers will remember that I recommended against conversion. TA.PR.D now pays 2.709% (on par) until 2021-3-31, while TA.PR.E will pay 3-month bills +203bp, reset quarterly.

TA.PR.E closed with a ridiculous quote of 10.00-11.00, 1×10. I expect this to decline precipitously in short order, given the closing quote on TA.PR.D of 8.39-50, 4×24.

Vital statistics are:

BCE.PR.N was listed today without fanfare and without trading. Assiduous Readers will remember that this issue results from a 17% conversion from BCE.PR.M, which I recommended against. BCE.PR.M has reset at 2.764% while BCE.PR.N will pay 3-Month Bills +209bp, reset quarterly.

As no quote was given for this issue, I have arbitrarily assigned it a quotation of 13.65-95, equal to that of BCE.PR.M.

Vital statistics are:

First National Financial Corporation has announced:

that 1,112,853 of its 4,000,000 issued and outstanding cumulative 5-year rate reset Class A Preference Shares, Series 1 (“Series 1 Preference Shares”) were tendered for conversion, on a one-for-one basis, into cumulative floating rate Class A Preference Shares, Series 2 (“Series 2 Preference Shares”). Effective April 1, 2016, the Company will have 2,887,147 Series 1 Preference Shares and 1,112,853 Series 2 Preference Shares outstanding and issued. The Series 1 Preference Shares will continue to be listed on the Toronto Stock Exchange (“TSX”) under the symbol FN.PR.A. The Series 2 Preference Shares will be listed on the TSX under the symbol FN.PR.B.

Assiduous Readers will remember that FN.PR.A will reset to 2.79%, while the FloatingReset issue, FN.PR.B, will pay 3-Month T-Bills + 207bp, reset quarterly. I recommended against conversion.